AARP To Stop Matching 401(k) Contributions

AARP has announced it will stop making contributions to its employees' 401(k) plans. The decision, which takes effect March 22, was not an easy one, says David Certner of AARP. Certner talks about why the company decided to drop the benefit.

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MICHELE NORRIS, host:

For months now, it's been hard to open those 401(k) statements when they arrive in the mail. Now, there's another reason for trepidation. A growing number of U.S. companies are suspending their contributions to staff 401(k) plans as a cost-cutting measure. General Motors, Motorola, Coca-Cola, FedEx, and UPS have all cut out their contributions in recent months.

But one company stands out. The AARP has cut its contributions. This is striking because before the AARP adopted that pithy acronym as its official title, it was known as the American Association for Retired Persons. And part of its mission is still to help Americans ease into their sunset years.

David Certner is legislative policy director for the AARP, and he joins us now to explain why the group made this decision.

Why did the AARP decide to cut its contributions?

MR. DAVID CERTNER (Legislative Policy Director, AARP): Well, of course, we all know these are very difficult economic times. And unfortunately, AARP is not immune, as well. We rely to a great extent on investments for operations, as well. We all know that investments are down, and therefore, we have made a number of changes on both the - actually on two fronts - on the - quite frankly, we've been trying to reduce some of the activities that don't align with our highest priorities in order to save money.

We've also taken a number of workforce related measures as well to save money. We have a duty to our members to be able to champion the issues they care about. And so, for this temporary basis, we have decided for the latter part of this year to suspend our 401(k) matching contributions. We fully plan on returning and restoring the match as soon as we are able to.

NORRIS: Some time in 2010?

MR. CERTNER: That is certainly our hope.

NORRIS: The hope, but no promises?

MR. CERTNER: Well, of course, the economy is not promising anybody anything at this point in time. But at this point, it's really a suspension for this year. And we are certainly not intending this to be a long-term change.

NORRIS: Mr. Certner, I don't mean to tussle with you on this, but I'm imagining you have a large membership. And I imagine that there are people listening to us in their kitchens, driving in their cars, fuming at, as they're holding on to their steering wheels saying, wait. This organization of all organizations is dropping its 401(k) contributions?

MR. CERTNER: Well, again, not dropping. We're only suspending for the year because of the difficult economic times. We're also continuing to make our contributions to underlying defined benefit plan.

I think, more importantly, for people who are listening to this, they're going to want to know that given the economic insecurity, given the health insecurity out there right now, they're going to want to know that AARP is out there fighting to try to improve both the pension and healthcare system in this country. That's what's really personal for individuals right now.

When people get their 401(k) statements and open them up, and they see that half the money is gone, quite frankly, that's more important to them right now than whether there's a matching contribution this year. When people trying to pay their healthcare and find that it's unaffordable because prices keep going up and up, they know that that's a critical issue they need to deal with now.

NORRIS: But you're saying in the irony...

MR. CERTNER: So, we want to continue focusing on those issues.

NORRIS: ...the irony will not be lost on our listeners here.

MR. CERTNER: I think we all have to understand that this is probably one of the most difficult and extraordinary economic years that we have ever faced. And there are difficult decisions that we're all making. And certainly, we would have preferred not to have suspended our match and to continue our 401(k) plan as it is with generous matching contributions.

However, we also did know that in order to maintain that matching contribution might mean that we would have to, for example, have fewer jobs here at AARP. And we thought it was really important in this difficult economic time that we try to keep as many people employed as possible, so that they have the ability to continue to save and continue to accrue 401(k) plans in the future and to be here next year when hopefully we can restore the matching contributions.

NORRIS: Mr. Certner, thank you very much for speaking with us.

MR. CERTNER: Thank you.

NORRIS: David Certner is the legislative policy director for the AARP.

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