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The Changing Face of Your 401(k)

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When you are considering a job change, don’t make any assumptions about the 401(k) benefits.

In a story I reported for Tuesday’s Wall Street Journal, it became clear that similar companies in the same industry, or different types of manufacturers in the same town, don’t necessarily offer the same benefits anymore. Some of those differences are due to tinkering with 401(k) matching contributions during and after the recession.

Since 2008, 18% of U.S. companies with at least 1,000 workers suspended their matching contributions, according to consulting firm Towers Watson.

Now, they are starting to return the benefit, with 43% of businesses planning to, or already, restoring their 401(k) matches in the next 12 months, up from 12% planning to do so last year, according to a survey released last week by Duke University and CFO Magazine.

But even when workers get the benefit back, it’s not necessarily the same as it used to be. For example, MGM Resorts International Inc. now matches 50% of up to 6% of eligible pay, rather than its former 100%. And for the time being, there’s a $500 cap on those contributions.

Other companies have a “temporary” cap as well, we’ve heard from their employees since the story was published.

There are ways in which 401(k) plans are arguably being changed for the better: First, by getting workers to save more by making their enrollment “automatic,” meaning you have to opt out of a plan, rather than into it.

Another common change: Matching 50% of a larger portion of a worker’s pay, rather than 100% of a smaller portion. So, for example, an employer might match 50% of up to 6% of pay, rather than 100% of 3%. You still get up a match of up to 3%, but you have to save twice as much to get it.

Then there’s the other big change that many companies, especially small businesses, are considering: Rather than offering a set match every year, varying it from year to year based on the company’s profits.

So, as companies start deciding fill some long-frozen job openings, and workers start looking around to see if there are positions with better benefits and pay available, the current state of the 401(k) plan is something to consider.

Some questions you might ask of people already working at a company you’re considering: What happened to the 401(k) plan during the recession? If the match was suspended and restored, was it changed when it came back? Is it expected to vary from year to year? How much of a commitment do you think the company has to its retirement plan for workers?

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