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Another Hopeful Sign?

Article

When the markets fell off a cliff, workers took a one-two punch in 401(k) losses and employer contribution cuts. Now, however, four out of five companies plan to restore the match this year, according to a survey by Hewitt Associates.

Ask two investment analysts which way the market is headed and you’ll get three opinions. At least that’s the way it seems, as market mavens try to read the omens to see if a double dip is on the horizon or if the market will right itself and continue to recover.

Meanwhile, back on Main Street, some industry consultants see a very positive sign in the number of companies that are going to resume matching their employees’ 401(k) contributions.

When the markets fell off a cliff, workers took a one-two punch. Not only did they see the assets in their 401(k) plans go into the tank, but many employers either cut back on their matching programs or got rid of them altogether. Now, however, four out of five of those companies plan to restore the match this year, according to a survey by Hewitt Associates, a human resources firm.

According to Hewitt, this is a faster recovery than the 50% that the company predicted for 2010. At the same time, the survey indicated that the number of firms that had automatic 401(k) enrollment, where the employee must actively choose not to be part of the program, rose to 59%, up from 51% a year ago.

Is this a positive sign? Many financial experts think so, because it shows that companies are more confident in the underlying strength of the economy and its longer-term prospects. Employers that see a brighter economic future are less leery of hiring, say the experts, which means that the return of the 401(k) match could be a sign of future strength in the labor market, leading to lower unemployment numbers.

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