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Schwab to reinstate 401(k) match

Charles Schwab Corp. will start matching employee 401(k) contributions next year, signaling its new optimism after years of layoffs and penny pinching.
/ Source: The Associated Press

Charles Schwab Corp. will revive its matching contribution to employee 401(k) accounts next year, marking the latest sign of the discount stock broker's renewed optimism after several grim years of layoffs and penny pinching.

CEO David Pottruck informed Schwab's 16,200 employees of the decision in a Tuesday memo that acknowledged how dismaying the one-year suspension has been, particularly for a brokerage that has long praised the virtues of 401(k) plans.

"We fully understand that the 401(k) match is not just another element of compensation or expense, it is a symbol of our commitment to all of you, and emblematic of our mission to help investors achieve their financial dreams," Pottruck wrote.

Schwab estimates it saved $48 million to $60 million by taking away the 401(k) match, a popular incentive used by employers to encourage workers to divert part of their paychecks into tax-deferred retirement accounts.

Under its plan, Schwab pitches in $500 for the first $250 in employee contributions, then matches dollar-for-dollar up to 5 percent of the compensation eligible for 401(k) deferral.

It's unclear how much reinstating the 401(k) match will cost Schwab next year because the company has thinned its payroll since it last paid the contributions.

The San Francisco-based company entered 2003 with 16,700 workers, but continued to eliminate jobs as part of a purge that began in 2001 to offset a $1.65 billion drop in annual revenue since 2000. Schwab has cut more than 10,000 jobs and closed dozens of offices in the past three years.

Tuesday's good news for employees coincided with the latest in a recent string of upbeat business reports from the company. Schwab's daily revenue-generating trades averaged 161,400 during November, the highest level in 13 months, while the money in customer accounts rose to $938.2 billion, the most since September 2001.

The bullish trends have convinced Schwab's management that the company can afford to loosen its tight cost controls.

In another show of confidence, Schwab last week decided to distribute an advance on its fourth-quarter bonuses, which will be larger than the third-quarter bonuses, company spokesman Glen Mathison said. The company also has increased its marketing budget by about 20 percent in the fourth quarter and expects to spend even more on promotions during the first three months of next year.