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Dropping your 401(k) match? Watch employees drop the plan

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in Small Business Tax Deduction Strategies

Suspending contributions to employees’ retirement accounts can immediately save an organization some cash. As the recession wears on, more businesses are looking at that option.

Still, few are actually taking this step, and the ones that are have said it is temporary. A Watson Wyatt survey in February revealed that 12% of organizations had reduced their 401(k) matching funds, and another 12% expect to.

A March report by WorldatWork delivered better news: 74% of employers said they had not changed their matching contributions as of December; 15% said they increased their match in 2008 or were considering doing so this year.

Quick savings … at what cost?

The average employer contribution is 50 cents on the dollar, up to 6% of an employee’s pay. The cost to employers: about 3% of payroll. Stopping such contributions results in immediate savings that show up every time accounting runs the payroll.

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