Yesterday the WSJ published an article highlighting the fact that several (they estimated roughly 12) corporations have announced plans to increase company matches into their 401(k) as a result of the benefits from the recent corporate tax changes. We are thrilled to read that this is occurring.
For many plan participants, the contributions into their 401(k)s from both themselves and their employer, are woefully inadequate. We were surprised to see that many of the increases were going from 50% of the first 2-3% to perhaps 50% of the first 4%. This movement, although positive, is not earth-shattering. In order to ensure an adequately funded retirement program, the annual contributions should be in the 15% range. However, there are some companies, such as Visa, that do a great job with their benefits as they have announced that they will begin matching 200% of the first 5% that an employee contributes up from their current 200% on the first 3%. Now, that is significant!
We would prefer to read that these increases are permanent, but for many of the companies, it appears that this enhancement is a “bonus” payment for this year. On the other hand, we much prefer to see any additional employee compensation go into their retirement accounts instead of enhancing current take-home pay. It is ruly unfortunate that a majority of Americans are not prepared to fund a retirement, let alone a lengthy one.
One additional comment, we love the idea that SunTrust Banks is going to open accounts for the 8% of their workforce that has opted out of the company 401(k) with the aim to deposit the 1% bonus payment that they are planning to make for the 92% of their 24,000 employees who have opened 401(k) accounts at this time. Hopefully, this action will encourage that 8% to begin funding those accounts, even if it is just 1% of pay.
Roughly 12 companies is a start, but Corporate America is gaining a heck of a lot more from the tax law changes. Let’s hope that their newfound windfall spurs on many other entities to engage in this positive corporate behavior.