US funds: retirement aid to return after recession

* US companies cut cash put to employee retirement plans

* Similar pattern seen in previous downturn

*

By Ross Kerber

WASHINGTON, May 8 (Reuters) - More U.S. companies have trimmed or eliminated contributions to their employees' 401(k) retirement funds this year, top fund industry executives said on Friday, but said they expect benefits will be restored when the economy recovers.

Fidelity Investments, one of America's largest investment managers and 401(k) plan administrators, said 7 percent of its corporate plan participants had suspended or reduced matches to their 401(k) plans at the end of the first quarter, Scott David, president of workplace investing at Boston-based Fidelity said.

At the start of the year it was at 5 percent, the company said earlier.

But David said he expects most companies to resume the matches as the economy improves, similar to the way employers restored 401(k) contributions after the downturn that ended in 2003. "The commitment by the plan sponsor tends to be there," David said.

At T. Rowe Price Group (TROW.O), another large mutual fund firm, just under 7 percent of plan sponsors cut or dropped their matching contributions amid the economic downturn, a top executive said.

Nearly all companies "have every intention of restoring the match," said Cynthia Egan, president of T. Rowe's retirement unit.

David and Egan and other fund executives spoke at the annual meeting of the mutual fund industry's trade group, the Investment Company Institute.

The numbers echo findings from national surveys. In January research firm Spectrem Group found more than a third of companies had suspended or cut their contributions to 401(k)s and similar plans, and nearly 30 percent more planned to do so in the coming year.

In April, consultant Watson Wyatt found 12 percent of companies had cut their match or planned to do so in the next year.

Many companies trimmed benefits last year and early this year as the country faced its worst financial crisis since the Great Depression and management looked for ways to trim costs.

Now that new economic data suggests the worst of the downturn may be over, fund executives said the speed of cuts is slowing.

"It's really leveled off, and I don't see the percentage going up," Egan said.