US companies pull out of retirement plans

[RedEarth]

A wave of US companies are suspending payments to their staff 401(k) retirement plans in a bid to cut costs amid the economic downturn.

Saks, General Motors, newspaper group McClatchy, clothing company J.Crew, FedEx, UPS, Coca-ColaBottling, Reader's Digest, Motorola, Regions Financial and Sprint Nextel are among the growing list of companies which have suspended contributions.

Even the AARP, the influential advocacy group formerly known as the American Association for Retired Persons, will suspend contributions to its staff 401(k) plan from March 22 for the rest of the year.

The growing number of suspensions appears to strike a blow against the viability of 401(k) plans, which were introduced 30 years ago as the main way that Americans should save for retirement, replacing defined benefit pension plans. Companies typically offered to match employee contributions up to 5 per cent of annual salary

http://www.ft.com/cms/s/0/155d5b54-0ddc-11de-8ea3-0000779fd2ac.html

[Selatius]

1. The 401(k) was introduced with the idea that employers would partially contribute.

By removing their matching contributions, they are essentially breaking a promise made 30 years ago. Voters would be more than justified in demanding a return of the original defined benefits pension plans instead of the current defined contributions pension plans.