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No End in Sight for Dropped 401(k)s and Decline in Matching

NEW YORK (TheStreet) -- The past two years have been good to stock market investors. The Standard & Poor's 500 Stock Index garnered 13.4% last year, and it's up 25.9% through Tuesday.

But employees may be increasingly losing a grip on those stellar returns, with more companies either eliminating 401(k) plans altogether or reducing their match levels. The 2012 Retirement Plan Survey from American Investment Planners, a Jericho, N.Y., investment advisory firm says 23,000 401(k) plans were eliminated last year -- about 4.5% of all U.S.-based 401(k) plans.

"Of those that terminated, 22% were health care providers," says Brett Goldstein, director of retirement planning at AIP. "Many doctors have terminated their plans because they have merged their practices with larger health care providers."

Even if workers lost nothing by rolling over a plan in a merger, the numerical loss follows a loss of another 19,000 the year before, the report says.

According to the survey, match levels also slid by 4.7% last year, following a 2% decline the year before and 5% drop in 2010.

The decline in matching investments may not be the employer's fault -- at least not entirely, Goldstein says.

"Many employees don't contribute enough to their 401(k) to get the full employer match," Goldstein says. "Employees also prefer cash bonuses as opposed to matching contributions that they can't touch until they turn 59.5. As a result, many employers are cutting back on their 401(k) matching or eliminating it completely to save money."

The downward direction in matching isn't over, Goldstein says.

"Clearly, as businesses look for ways to lower expenses and improve bottom lines, it is not surprising that businesses have stopped matching," he says. "I have been studying this trend for the past four years and don't see the trend abating anytime soon."

That would run against the interest of working-class Americans, who rely on their 401(k) plan proceeds to fund a decent retirement. A Gallup survey reveals that 83% of Americans say 401(k)-type plans are either "very important" or "extremely important" in securing a good financial future.

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