Employer won't Match 401k. Why?

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ThisDinosaur
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Employer won't Match 401k. Why?

Post by ThisDinosaur » Sat Sep 15, 2018 8:11 am

A 401K can legally have up to $55.5K put into it per year. That's $18.5K pretax from the employee, up to 100% pretax match from employer, and additional 18.5K post tax from employee "if your plan allows."

First, please correct me if I got any part of that wrong.

Second, who decides and how is it decided whether your "plan allows?" My current employer does not offer a match and only allows up to 1% post tax contribution. I tried negotiating for a full match in exchange for a commensurate reduction in nominal salary, but I got nowhere.

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ruralavalon
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Re: Employer won't Match 401k. Why?

Post by ruralavalon » Sat Sep 15, 2018 8:26 am

ThisDinosaur wrote:
Sat Sep 15, 2018 8:11 am
A 401K can legally have up to $55.5K put into it per year. That's $18.5K pretax from the employee, up to 100% pretax match from employer, and additional 18.5K post tax from employee "if your plan allows."

First, please correct me if I got any part of that wrong.

Second, who decides and how is it decided whether your "plan allows?" My current employer does not offer a match and only allows up to 1% post tax contribution. I tried negotiating for a full match in exchange for a commensurate reduction in nominal salary, but I got nowhere.
The employer decides. The law does not require the employer to offer any employer match or any employer contribution. The employer is not required to offer a 401k plan at all.

I never had an employer match.

You will have to ask your employer why they decided not to offer an employer match in their 401k plan. The answer is probably that they didn't want the extra expense.

Edited for typos.
Last edited by ruralavalon on Sat Sep 15, 2018 8:35 am, edited 2 times in total.
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TigerNest
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Re: Employer won't Match 401k. Why?

Post by TigerNest » Sat Sep 15, 2018 8:34 am

Employers aren't allowed to selectively give you a higher match. They have to treat all employees equally.

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Re: Employer won't Match 401k. Why?

Post by Vanguard Fan 1367 » Sat Sep 15, 2018 8:34 am

I decided to offer a 401K Safe Harbor to my employees. I give them 3 percent of their salary. They have the right to contribute up to 18K of their salary into the 401K which postpones their paying income tax on that contribution until the money is withdrawn, hopefully in retirement. I would probably do something different now but at the time I did this a number of years ago it allowed me to hire my wife, pay her about 20K and she would be able to contribute 18k to her 401K and I could contribute 18k to my 401K which reduces our income for the current year by 36 thousand.

There are a number of options to the 401K Plan. The 3 percent plus whatever my employees contribute from their salary does add up, especially in something like an S & P 500 index fund.

student
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Re: Employer won't Match 401k. Why?

Post by student » Sat Sep 15, 2018 8:36 am

Your employer is not going to negotiate with each individual employee on his/her 401k match. Well, maybe they will for the CEO but not for a regular employee. Look at the total compensation. I think you have a better chance in negotiating your salary.

Rupert
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Re: Employer won't Match 401k. Why?

Post by Rupert » Sat Sep 15, 2018 10:29 am

ThisDinosaur wrote:
Sat Sep 15, 2018 8:11 am
I tried negotiating for a full match in exchange for a commensurate reduction in nominal salary, but I got nowhere.
That would be illegal -- violates ERISA. Generally speaking, they have to provide a match for everyone or no one. (There are some complicated rules relating to, e.g., executive deferred compensation programs, but that doesn't seem to be what you're asking about). Your employer is cheap if they've chosen no one. Or they're a company with very high turnover and no real interest in keeping longterm employees. Is there any sort of separate retirement plan for executives/owners?

HEDGEFUNDIE
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Re: Employer won't Match 401k. Why?

Post by HEDGEFUNDIE » Sat Sep 15, 2018 10:34 am

A 401k match is an employee benefit much like PTO days or paternity leave.

It’s something to bring up with HR, probably along the lines of a “you guys are not competitive with competitors in the industry” veiled threat.

cdu7
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Re: Employer won't Match 401k. Why?

Post by cdu7 » Sat Sep 15, 2018 11:18 am

They don’t want to. Entirely depends on the employer. I once saw a 401k plan where they put in 15k a year no matter what you did, but the options were all horrible high fee ones

aristotelian
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Re: Employer won't Match 401k. Why?

Post by aristotelian » Sat Sep 15, 2018 11:22 am

Your employer has elected not to incentivize retirement savings. Many employers offer no 401k or 401k with no match. You should consider their overall compensation and benefits if you have offers elsewhere.

ThisDinosaur
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Re: Employer won't Match 401k. Why?

Post by ThisDinosaur » Sat Sep 15, 2018 11:28 am

Rupert wrote:
Sat Sep 15, 2018 10:29 am
That would be illegal -- violates ERISA. Generally speaking, they have to provide a match for everyone or no one. (There are some complicated rules relating to, e.g., executive deferred compensation programs, but that doesn't seem to be what you're asking about). Your employer is cheap if they've chosen no one. Or they're a company with very high turnover and no real interest in keeping longterm employees. Is there any sort of separate retirement plan for executives/owners?
Yes, they offer a SERP . But that's a very different animal and I'd rather have the extra 401k money.

Why would it be illegal?

And who, in a corporation, would be the one who makes the decision to offer matching and post tax limits?

How does it cost the company any money to subtract 18K from my salary and match 18K in my retirement fund?

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Re: Employer won't Match 401k. Why?

Post by Storamin » Sat Sep 15, 2018 11:36 am

ThisDinosaur wrote:
Sat Sep 15, 2018 11:28 am
Rupert wrote:
Sat Sep 15, 2018 10:29 am
That would be illegal -- violates ERISA. Generally speaking, they have to provide a match for everyone or no one. (There are some complicated rules relating to, e.g., executive deferred compensation programs, but that doesn't seem to be what you're asking about). Your employer is cheap if they've chosen no one. Or they're a company with very high turnover and no real interest in keeping longterm employees. Is there any sort of separate retirement plan for executives/owners?
Yes, they offer a SERP . But that's a very different animal and I'd rather have the extra 401k money.

Why would it be illegal?

And who, in a corporation, would be the one who makes the decision to offer matching and post tax limits?

How does it cost the company any money to subtract 18K from my salary and match 18K in my retirement fund?
It's illegal because the ERISA federal law forbids it. When they created 401k plans they wanted everyone to be treated equally and not only the rich executives to get 401k matches while regular employees get screwed.

Who chooses this? Company management, payroll & HR department, as long as they operate within the ERISA laws.

They can't do it - it doesn't matter what it could or would cost. Many people look only at their base salary - 401k matching or contributions are other compensation that some people may not consider.

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neurosphere
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Re: Employer won't Match 401k. Why?

Post by neurosphere » Sat Sep 15, 2018 11:37 am

ThisDinosaur wrote:
Sat Sep 15, 2018 11:28 am
How does it cost the company any money to subtract 18K from my salary and match 18K in my retirement fund?
It would be all the same to the company, financially. But the point is it's EVERY employee, or none. Every employee (with some exceptions) has to be under the same set of rules when it comes to 401k plans. If you have employees making $50,000 in salary, how many would take that job if they instead got $32,000 in salary and $18,000 in a direct 401k contribution? And if they wanted/needed access to that $18,000 there would be a 10% penalty?
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sambb
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Re: Employer won't Match 401k. Why?

Post by sambb » Sat Sep 15, 2018 3:20 pm

the employer doesnt give a match. It is an expense on a balance sheet.
They pay for it, which means that you pay for it, or shareholders pay for it.
Someone pays for it, and it affects net revenue since it is an expense.
employees may think it is free money, but it is an expense. Something else on a balance sheet would have to be cut to make budget if this is offered. typically.

WanderingDoc
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Re: Employer won't Match 401k. Why?

Post by WanderingDoc » Sat Sep 15, 2018 4:17 pm

neurosphere wrote:
Sat Sep 15, 2018 11:37 am
ThisDinosaur wrote:
Sat Sep 15, 2018 11:28 am
How does it cost the company any money to subtract 18K from my salary and match 18K in my retirement fund?
It would be all the same to the company, financially. But the point is it's EVERY employee, or none. Every employee (with some exceptions) has to be under the same set of rules when it comes to 401k plans. If you have employees making $50,000 in salary, how many would take that job if they instead got $32,000 in salary and $18,000 in a direct 401k contribution? And if they wanted/needed access to that $18,000 there would be a 10% penalty?
This! The latter would entail servitude and the rat race from age 21 to 65, and then hope you'll be healthy or alive to actually spend that money. The prospect of putting your only/all savings into a 401k :oops:
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WanderingDoc
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Re: Employer won't Match 401k. Why?

Post by WanderingDoc » Sat Sep 15, 2018 4:23 pm

sambb wrote:
Sat Sep 15, 2018 3:20 pm
the employer doesnt give a match. It is an expense on a balance sheet.
They pay for it, which means that you pay for it, or shareholders pay for it.
Someone pays for it, and it affects net revenue since it is an expense.
employees may think it is free money, but it is an expense. Something else on a balance sheet would have to be cut to make budget if this is offered. typically.
Exactly. Getting a company match means you arent getting something else. Investing in a 401k means you aren't investing in something else (that pays you today, not decades from now).
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JoMoney
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Re: Employer won't Match 401k. Why?

Post by JoMoney » Sat Sep 15, 2018 4:34 pm

We would just be guessing as to why, the employer is the only one that knows.
One guess might be they don't provide any matching because they're afraid of having their contributions running afoul of rules against top-heavy 401k plans where only key employees that are highly compensated make up the majority of the plan.
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Re: Employer won't Match 401k. Why?

Post by z3r0c00l » Sat Sep 15, 2018 5:05 pm

My company (large but non-profit) got rid of our 401K match a few years back, in exchange for not weakening the pension terms. That was a strong push by the union, for obvious reasons, but was a real disappointment to people like me with the discipline to save. Clearly it would be much cheaper to drop the pension and keep the 401K match, but the union would never even consider that idea. It was a de-facto 3% pay cut for people like me, although most co-workers didn't seem to contribute enough to the 401K to get the full match. Talk about leaving money on the table...

In the event, our pension can start as early at 52, and full at 55 by rule of 85, so it is better in a sense for someone who wants to retire fairly early. The 401K at 59 seems painfully far off even to me. Social Security isn't even on the horizon for me at 30+ years off.

So why don't they match? Cheapness would be my answer, although it may cost them more in the long run if they fail to hire top talent due to a less-than-ideal benefits package. IMHO, a 1-3% 401K match costs little and benefits much in morale and recruitment.

awval999
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Re: Employer won't Match 401k. Why?

Post by awval999 » Sat Sep 15, 2018 5:09 pm

cdu7 wrote:
Sat Sep 15, 2018 11:18 am
They don’t want to. Entirely depends on the employer. I once saw a 401k plan where they put in 15k a year no matter what you did, but the options were all horrible high fee ones
Um. I'd take a $15k/year free match no matter what high ER fund they wanted to put me. Gimme that 1.8% ER. Yes please, can I have another?

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JoMoney
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Re: Employer won't Match 401k. Why?

Post by JoMoney » Sat Sep 15, 2018 5:33 pm

z3r0c00l wrote:
Sat Sep 15, 2018 5:05 pm
... The 401K at 59 seems painfully far off even to me. Social Security isn't even on the horizon for me at 30+ years off...
Off topic, but FWIW a 401k can have early distributions (if the plan allows for it), and without penalty if following 72(t) "Substantially Equal Periodic Payments" rules that effectively annuitize the distributions over ones life expectancy. If the 401k doesn't allow for partial distributions, it can be rolled into an IRA and SEPP from there, or another option is rolling into an IRA and do roth conversion ladder taking advantage of the fact that roth contributions and conversions can be withdrawn penalty free after five years (but requires five years of living expenses buffer before the ladder kicks in).
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

JBTX
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Re: Employer won't Match 401k. Why?

Post by JBTX » Sat Sep 15, 2018 10:13 pm

ThisDinosaur wrote:
Sat Sep 15, 2018 8:11 am
A 401K can legally have up to $55.5K put into it per year. That's $18.5K pretax from the employee, up to 100% pretax match from employer, and additional 18.5K post tax from employee "if your plan allows."

First, please correct me if I got any part of that wrong.

Second, who decides and how is it decided whether your "plan allows?" My current employer does not offer a match and only allows up to 1% post tax contribution. I tried negotiating for a full match in exchange for a commensurate reduction in nominal salary, but I got nowhere.
An employer match is an expense to the Company. A Company should not expend funds unless it is a net benefit to them. It could be that management or the owners won't attach significant value to a match. Many employees value pay right now. They attach less value to benefits that can't be spent on cars or mortgage payments.

As to post tax, it is an additional administrative burden, requires additional testing and may throw your plan out of balance if only highly compensated employees participate.

ThisDinosaur
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Re: Employer won't Match 401k. Why?

Post by ThisDinosaur » Sun Sep 16, 2018 12:11 am

JBTX wrote:
Sat Sep 15, 2018 10:13 pm
As to post tax, it is an additional administrative burden, requires additional testing and may throw your plan out of balance if only highly compensated employees participate.
Can you tell me more about what you mean here? What additional testing? What do you mean "out of balance?" And why does it matter who chooses to participate, assuming it was offered to all employees?
JoMoney wrote:
Sat Sep 15, 2018 4:34 pm
One guess might be they don't provide any matching because they're afraid of having their contributions running afoul of rules against top-heavy 401k plans where only key employees that are highly compensated make up the majority of the plan.
What rules? Couldn't they hypothetically offer it to all full time employees? Those making less than 36k would only be limited by the rule that you cant put 100% of your salary into a tax deductible retirement vehicle, yes?

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Re: Employer won't Match 401k. Why?

Post by JBTX » Sun Sep 16, 2018 12:53 am

ThisDinosaur wrote:
Sun Sep 16, 2018 12:11 am
JBTX wrote:
Sat Sep 15, 2018 10:13 pm
As to post tax, it is an additional administrative burden, requires additional testing and may throw your plan out of balance if only highly compensated employees participate.
Can you tell me more about what you mean here? What additional testing? What do you mean "out of balance?" And why does it matter who chooses to participate, assuming it was offered to all employees?
JoMoney wrote:
Sat Sep 15, 2018 4:34 pm
One guess might be they don't provide any matching because they're afraid of having their contributions running afoul of rules against top-heavy 401k plans where only key employees that are highly compensated make up the majority of the plan.
What rules? Couldn't they hypothetically offer it to all full time employees? Those making less than 36k would only be limited by the rule that you cant put 100% of your salary into a tax deductible retirement vehicle, yes?
401k plans are governed by federal law called ERISA. 401ks give tax benefits to contributors. But this was only allowed if it benefitted all employees. The government does not want to give tax benefits that only benefit highly compensated employees.

If you have a 401k plan where only highly compensated employees contribute it is going to run afoul of ERISA regulations.

It's not just enough to offer it to all employees. Non highly employees have to actually participate or else highly compensated employees lose their ability to participate.

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nedsaid
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Re: Employer won't Match 401k. Why?

Post by nedsaid » Sun Sep 16, 2018 6:05 am

ThisDinosaur wrote:
Sat Sep 15, 2018 8:11 am
A 401K can legally have up to $55.5K put into it per year. That's $18.5K pretax from the employee, up to 100% pretax match from employer, and additional 18.5K post tax from employee "if your plan allows."

First, please correct me if I got any part of that wrong.

Second, who decides and how is it decided whether your "plan allows?" My current employer does not offer a match and only allows up to 1% post tax contribution. I tried negotiating for a full match in exchange for a commensurate reduction in nominal salary, but I got nowhere.
Why? Because they are cheap, that's why. No big mystery here.

Perhaps you work in an industry where profit margins are very low.

In any business, large or small, matches on retirement plan contributions are set as a policy. Not something that can normally be negotiated.
A fool and his money are good for business.

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oldcomputerguy
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Re: Employer won't Match 401k. Why?

Post by oldcomputerguy » Sun Sep 16, 2018 6:39 am

ThisDinosaur wrote:
Sat Sep 15, 2018 11:28 am
How does it cost the company any money to subtract 18K from my salary and match 18K in my retirement fund?
Obviously it costs the company nothing (aside from any overhead expense of the plan itself) to withhold 18k from your pay and move it into your 401k account. Just as obviously, though, if the company then elects to match your 18k with another 18k, this costs them, because that additional 18k has to come out of the company's profits.

Or am I misunderstanding your question?
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yatesd
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Re: Employer won't Match 401k. Why?

Post by yatesd » Sun Sep 16, 2018 6:54 am

I am responsible for the 401K plan at a 50ish employee company. When I came onboard, we had a 401K with high fees but "no cost" to the employer. A few years ago, we switched to a 401K plan using Vanguard (actually Ascensus, which is also a hassle. Employers with less than $20M in assets can't work with Vanguard directly) with low fees but now it costs the company about $4,500 in admin fees.

Some thoughts:

- Not sure most employees recognize the company spent $4,500 to lower fees from 1.7% (approximately) to as low as .09%.
- 401K rules are a real pain. Not small business friendly at all. Reports, admin expenses, rules that make it challenging to incrementally make changes and annual tests.
- My employer pays well, but a decade ago they relayed a story where they provided a 3% match instead of a raise (still increased payroll expenses by the same percentage) and told employees about the tax benefits and that raises would be minimal that year...a month later everyone wanted to know about the status of their raise. Only so much money to go around.
- I would love to slowly add matching contributions. 1% this year, another 1% when we can next afford, etc. but it is not allowed. The rules designed to help employees prevent us from doing this. We got to go "all in" (believe 100% on first 3%) or pass a test and risk laying off key employees if we realize that we can't afford at the end of the year.
- I even turned on a feature that supposedly helped employees, defaulting the initial contribution to 6%. What a nightmare to manage. Half the employees scramble to turn off after it starts affecting their paychecks. I would turn this feature off, but it requires us spending more money to change our program (believe it costs $1,500 to make these changes + time).

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Re: Employer won't Match 401k. Why?

Post by Grt2bOutdoors » Sun Sep 16, 2018 7:02 am

cdu7 wrote:
Sat Sep 15, 2018 11:18 am
They don’t want to. Entirely depends on the employer. I once saw a 401k plan where they put in 15k a year no matter what you did, but the options were all horrible high fee ones
It’s still free money, would take it in a heartbeat.
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Re: Employer won't Match 401k. Why?

Post by Vanguard Fan 1367 » Sun Sep 16, 2018 8:43 am

nedsaid wrote:
Sun Sep 16, 2018 6:05 am
ThisDinosaur wrote:
Sat Sep 15, 2018 8:11 am
A 401K can legally have up to $55.5K put into it per year. That's $18.5K pretax from the employee, up to 100% pretax match from employer, and additional 18.5K post tax from employee "if your plan allows."

First, please correct me if I got any part of that wrong.

Second, who decides and how is it decided whether your "plan allows?" My current employer does not offer a match and only allows up to 1% post tax contribution. I tried negotiating for a full match in exchange for a commensurate reduction in nominal salary, but I got nowhere.
Why? Because they are cheap, that's why. No big mystery here.

Perhaps you work in an industry where profit margins are very low.

In any business, large or small, matches on retirement plan contributions are set as a policy. Not something that can normally be negotiated.
You don't have to look very far to find out that a high percentage of businesses fail. I have managed to keep a business open for almost 40 years. Since the Great Recession various things have happened to make the business profit smaller. I think that if I can keep the doors open that my employees would prefer that. So you can call business owners cheap but at the same time it is very difficult to keep a business open judging from the high statistics on failure (like 90 %). So somehow to survive a business has to figure out how to control costs, especially if the income is declining.

Falcon2018
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Re: Employer won't Match 401k. Why?

Post by Falcon2018 » Sun Sep 16, 2018 8:55 am

sambb wrote:
Sat Sep 15, 2018 3:20 pm
the employer doesnt give a match. It is an expense on a balance sheet.
They pay for it, which means that you pay for it, or shareholders pay for it.
Someone pays for it, and it affects net revenue since it is an expense.
employees may think it is free money, but it is an expense. Something else on a balance sheet would have to be cut to make budget if this is offered. typically.
As a CPA the lack of understanding of accounting terms is offensive in this post.
Expenses don't go on the balance sheet.
Net revenue does not mean net income.

Falcon2018
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Re: Employer won't Match 401k. Why?

Post by Falcon2018 » Sun Sep 16, 2018 8:55 am

sambb wrote:
Sat Sep 15, 2018 3:20 pm
the employer doesnt give a match. It is an expense on a balance sheet.
They pay for it, which means that you pay for it, or shareholders pay for it.
Someone pays for it, and it affects net revenue since it is an expense.
employees may think it is free money, but it is an expense. Something else on a balance sheet would have to be cut to make budget if this is offered. typically.
As a CPA the lack of understanding of accounting terms is offensive in this post.
Expenses don't go on the balance sheet.
Net revenue does not mean net income.

l2ridehd
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Re: Employer won't Match 401k. Why?

Post by l2ridehd » Sun Sep 16, 2018 9:01 am

By asking for an 18.5K match every year for every employee you will never succeed. That will cost them close to that for every employee who is in the plan. Start small. Ask for .5% match for everyone and once it's in place, then ask to move it up a bit each year. That way they don't feel the major hit of what you're asking.

SoAnyway
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Re: Employer won't Match 401k. Why?

Post by SoAnyway » Sun Sep 16, 2018 10:33 am

JBTX wrote:
Sun Sep 16, 2018 12:53 am
ThisDinosaur wrote:
Sun Sep 16, 2018 12:11 am
JBTX wrote:
Sat Sep 15, 2018 10:13 pm
As to post tax, it is an additional administrative burden, requires additional testing and may throw your plan out of balance if only highly compensated employees participate.
Can you tell me more about what you mean here? What additional testing? What do you mean "out of balance?" And why does it matter who chooses to participate, assuming it was offered to all employees?
JoMoney wrote:
Sat Sep 15, 2018 4:34 pm
One guess might be they don't provide any matching because they're afraid of having their contributions running afoul of rules against top-heavy 401k plans where only key employees that are highly compensated make up the majority of the plan.
What rules? Couldn't they hypothetically offer it to all full time employees? Those making less than 36k would only be limited by the rule that you cant put 100% of your salary into a tax deductible retirement vehicle, yes?
401k plans are governed by federal law called ERISA. 401ks give tax benefits to contributors. But this was only allowed if it benefitted all employees. The government does not want to give tax benefits that only benefit highly compensated employees.

If you have a 401k plan where only highly compensated employees contribute it is going to run afoul of ERISA regulations.

It's not just enough to offer it to all employees. Non highly employees have to actually participate or else highly compensated employees lose their ability to participate.
OP, here's more info about what JBTX and JoMoney are referring to if you're interested.

dknightd
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Re: Employer won't Match 401k. Why?

Post by dknightd » Sun Sep 16, 2018 10:54 am

ThisDinosaur wrote:
Sat Sep 15, 2018 8:11 am
A 401K can legally have up to $55.5K put into it per year. That's $18.5K pretax from the employee, up to 100% pretax match from employer, and additional 18.5K post tax from employee "if your plan allows."

First, please correct me if I got any part of that wrong.

Second, who decides and how is it decided whether your "plan allows?" My current employer does not offer a match and only allows up to 1% post tax contribution. I tried negotiating for a full match in exchange for a commensurate reduction in nominal salary, but I got nowhere.
Your employer decides. If you do not like it find a new employer

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Wildebeest
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Re: Employer won't Match 401k. Why?

Post by Wildebeest » Sun Sep 16, 2018 12:01 pm

yatesd wrote:
Sun Sep 16, 2018 6:54 am
I am responsible for the 401K plan at a 50ish employee company. When I came onboard, we had a 401K with high fees but "no cost" to the employer. A few years ago, we switched to a 401K plan using Vanguard (actually Ascensus, which is also a hassle. Employers with less than $20M in assets can't work with Vanguard directly) with low fees but now it costs the company about $4,500 in admin fees.

Some thoughts:

- Not sure most employees recognize the company spent $4,500 to lower fees from 1.7% (approximately) to as low as .09%.
- 401K rules are a real pain. Not small business friendly at all. Reports, admin expenses, rules that make it challenging to incrementally make changes and annual tests.
- My employer pays well, but a decade ago they relayed a story where they provided a 3% match instead of a raise (still increased payroll expenses by the same percentage) and told employees about the tax benefits and that raises would be minimal that year...a month later everyone wanted to know about the status of their raise. Only so much money to go around.
- I would love to slowly add matching contributions. 1% this year, another 1% when we can next afford, etc. but it is not allowed. The rules designed to help employees prevent us from doing this. We got to go "all in" (believe 100% on first 3%) or pass a test and risk laying off key employees if we realize that we can't afford at the end of the year.
- I even turned on a feature that supposedly helped employees, defaulting the initial contribution to 6%. What a nightmare to manage. Half the employees scramble to turn off after it starts affecting their paychecks. I would turn this feature off, but it requires us spending more money to change our program (believe it costs $1,500 to make these changes + time).
Great thoughts. I would love to have yatesd to be charge of our 401 K.

I would like to amplify what other posters have stated.

The Employer has to make a decision as to how they will reward employees. Employees in my experience have little interest in a 401 K plan and do not find it an employer match that interesting, they prefer a raise. And the work and cost of an 401 K with legal hoopla is not to be underestimated.

When I was in charge of our plan we offered a Cash Balance plan/ profit sharing offered between 4 and 6 % match every year ( of which most of the tax benefit went to the employer). Our plan offered lowest cost Mutual Funds and the total cost for the pension plan was born by the employer ( Third Party Administrator charged us $ 6500).

Now we are part of bigger entity and I still pay for employer contribution for my employees and we have a simpler plan ( no more cash balance options) in which the employer's match is 3% of their salary. The bigger entity has a different Third Party Administrator. It allows me to put the max before taxes away a year and I do not have to pay for any cost of administering the plan as an employer nor does the larger entity ( now the employees pay for the cost of the plan and also by 1.5 % expense rates for the different active mutual fund choices).

The wiki is a great resource to campaign for a better 401 K and after one year I had success advocating for low expense ratio fund options by asking for a self directed brokerage option. viewtopic.php?f=10&t=232242
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Re: Employer won't Match 401k. Why?

Post by nedsaid » Sun Sep 16, 2018 12:21 pm

Vanguard Fan 1367 wrote:
Sun Sep 16, 2018 8:43 am
nedsaid wrote:
Sun Sep 16, 2018 6:05 am
ThisDinosaur wrote:
Sat Sep 15, 2018 8:11 am
A 401K can legally have up to $55.5K put into it per year. That's $18.5K pretax from the employee, up to 100% pretax match from employer, and additional 18.5K post tax from employee "if your plan allows."

First, please correct me if I got any part of that wrong.

Second, who decides and how is it decided whether your "plan allows?" My current employer does not offer a match and only allows up to 1% post tax contribution. I tried negotiating for a full match in exchange for a commensurate reduction in nominal salary, but I got nowhere.
Why? Because they are cheap, that's why. No big mystery here.

Perhaps you work in an industry where profit margins are very low.

In any business, large or small, matches on retirement plan contributions are set as a policy. Not something that can normally be negotiated.
You don't have to look very far to find out that a high percentage of businesses fail. I have managed to keep a business open for almost 40 years. Since the Great Recession various things have happened to make the business profit smaller. I think that if I can keep the doors open that my employees would prefer that. So you can call business owners cheap but at the same time it is very difficult to keep a business open judging from the high statistics on failure (like 90 %). So somehow to survive a business has to figure out how to control costs, especially if the income is declining.
I alluded to what you are talking about when I said the poster might work in an industry where the margins are very low. I am quite familiar with small business, I respect anyone who can keep the doors open for 40 years. Business is hard and you always have competition. If you do something really well, someone will notice and will try to copy your success.

But yes, business and large business can be cheap. Publicly traded companies face pressure to keep margins as high as possible and this means squeezing employees. It is pretty appalling to hear stories about how employees are treated sometimes particularly by big business. The answer to any business problem nowadays seems to be laying off employees. One local insurance company was very, very, very skimpy on raises while the CEO gave himself a big raise. Employees asked him about this and he said something like "what do you need a raise for, you can eat Top Ramen a couple times a week." It created an uproar and the CEO apologized. In my view, he should have been fired by the Board. Yes, in this case, the company was cheap.

In your position, you are probably doing as well as you can for the employees. My favorite little coffee shop was put out of business by a couple of developments: higher minimum wage and higher rents. It was a marginal business and the two developments were the knockout blow. The landlord who wanted the rent increase has seen that space sit empty for about a year now.

I am pretty positive towards business and particularly small business. But something has happened and it is harder to find truly good employers to work for. My eyes and ears are open and I am not liking what I see and what I hear.
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Re: Employer won't Match 401k. Why?

Post by JBTX » Sun Sep 16, 2018 3:42 pm

yatesd wrote:
Sun Sep 16, 2018 6:54 am
I am responsible for the 401K plan at a 50ish employee company. When I came onboard, we had a 401K with high fees but "no cost" to the employer. A few years ago, we switched to a 401K plan using Vanguard (actually Ascensus, which is also a hassle. Employers with less than $20M in assets can't work with Vanguard directly) with low fees but now it costs the company about $4,500 in admin fees.

Some thoughts:

- Not sure most employees recognize the company spent $4,500 to lower fees from 1.7% (approximately) to as low as .09%.
- 401K rules are a real pain. Not small business friendly at all. Reports, admin expenses, rules that make it challenging to incrementally make changes and annual tests.
- My employer pays well, but a decade ago they relayed a story where they provided a 3% match instead of a raise (still increased payroll expenses by the same percentage) and told employees about the tax benefits and that raises would be minimal that year...a month later everyone wanted to know about the status of their raise. Only so much money to go around.
- I would love to slowly add matching contributions. 1% this year, another 1% when we can next afford, etc. but it is not allowed. The rules designed to help employees prevent us from doing this. We got to go "all in" (believe 100% on first 3%) or pass a test and risk laying off key employees if we realize that we can't afford at the end of the year.
- I even turned on a feature that supposedly helped employees, defaulting the initial contribution to 6%. What a nightmare to manage. Half the employees scramble to turn off after it starts affecting their paychecks. I would turn this feature off, but it requires us spending more money to change our program (believe it costs $1,500 to make these changes + time).

Agree with everything here. I'm helping a friend switch from high fee John Hancock 401k plan to vanguard Ascensus coupled with a flat fee advisor. Fund fees will be really low, but employer will now pick up vanguard fees, and advisor fees, plus the cost of employer match contributions of a safe harbor plan. Owner will be able to save much more in plan, but the additional outlay on fees and match will exceed the personal benefit he gets. Ultimately he is doing it as a way to take care of and reward long term employees, but is unlikely the employees will value it to the extent of the additional costs.

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Re: Employer won't Match 401k. Why?

Post by nisiprius » Sun Sep 16, 2018 6:54 pm

Employers don't offer a match entirely out of the goodness of their heart. They offer a match because it encourages participation in the plan. They need to do this to keep the plan available and useful to highly-compensated employees (HCE's).

The SEC has rules requiring high participation to make sure that it is set up in good-faith plan for use by all employees, and isn't just there for highly-compensated employees (HCE's). If participants include too many highly-compensated employees (HCE's) and not enough less-compensated employees (LCEs), problems ensue. One is that the SEC will retroactively lower the maximum contribution. HCEs who contributed the maximum get some of their contributions returned, and since they've already enjoyed a tax break on that amount, they need to pay back some taxes, which, apart from the money, is also a medium-sized nuisance.

I was at a company that initially offered a stingy match (0.5% of the first $1,000), and that was enough to get enough participation. They hit a rough business patch, and stopped offering any match. With no match at all, participation dropped and HCE's started to get contributions returned. After a few years they put back the stingy match, participation by LCE's rose, and everything was OK again.
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Re: Employer won't Match 401k. Why?

Post by gasman » Sun Sep 16, 2018 7:02 pm

As a former small business owner that was involved in recruiting I can tell you that we did no get much bang for our buck for our generous 401k match. The large majority of candidates compared us to our competition on starting salary. That was what they chose to care about. So we went the safe harbor 3% route and bumped our starting salary. BTS these were six figure professionals who were overwhelmingly in favor of the change.

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Re: Employer won't Match 401k. Why?

Post by smitcat » Sun Sep 16, 2018 9:15 pm

JBTX wrote:
Sun Sep 16, 2018 3:42 pm
yatesd wrote:
Sun Sep 16, 2018 6:54 am
I am responsible for the 401K plan at a 50ish employee company. When I came onboard, we had a 401K with high fees but "no cost" to the employer. A few years ago, we switched to a 401K plan using Vanguard (actually Ascensus, which is also a hassle. Employers with less than $20M in assets can't work with Vanguard directly) with low fees but now it costs the company about $4,500 in admin fees.

Some thoughts:

- Not sure most employees recognize the company spent $4,500 to lower fees from 1.7% (approximately) to as low as .09%.
- 401K rules are a real pain. Not small business friendly at all. Reports, admin expenses, rules that make it challenging to incrementally make changes and annual tests.
- My employer pays well, but a decade ago they relayed a story where they provided a 3% match instead of a raise (still increased payroll expenses by the same percentage) and told employees about the tax benefits and that raises would be minimal that year...a month later everyone wanted to know about the status of their raise. Only so much money to go around.
- I would love to slowly add matching contributions. 1% this year, another 1% when we can next afford, etc. but it is not allowed. The rules designed to help employees prevent us from doing this. We got to go "all in" (believe 100% on first 3%) or pass a test and risk laying off key employees if we realize that we can't afford at the end of the year.
- I even turned on a feature that supposedly helped employees, defaulting the initial contribution to 6%. What a nightmare to manage. Half the employees scramble to turn off after it starts affecting their paychecks. I would turn this feature off, but it requires us spending more money to change our program (believe it costs $1,500 to make these changes + time).

Agree with everything here. I'm helping a friend switch from high fee John Hancock 401k plan to vanguard Ascensus coupled with a flat fee advisor. Fund fees will be really low, but employer will now pick up vanguard fees, and advisor fees, plus the cost of employer match contributions of a safe harbor plan. Owner will be able to save much more in plan, but the additional outlay on fees and match will exceed the personal benefit he gets. Ultimately he is doing it as a way to take care of and reward long term employees, but is unlikely the employees will value it to the extent of the additional costs.
Everything you say is absolutely true - and at the end of the day the large majority of employees will not take advantage of the 401K and it will be very hard to justify keeping it.

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Re: Employer won't Match 401k. Why?

Post by Vanguard Fan 1367 » Mon Sep 17, 2018 9:53 am

gasman wrote:
Sun Sep 16, 2018 7:02 pm
As a former small business owner that was involved in recruiting I can tell you that we did no get much bang for our buck for our generous 401k match. The large majority of candidates compared us to our competition on starting salary. That was what they chose to care about. So we went the safe harbor 3% route and bumped our starting salary. BTS these were six figure professionals who were overwhelmingly in favor of the change.
I appreciate your posting. I have wondered if going the Safe Harbour 3 percent route was the best way to go for the employees. Maybe it is. At least 3 percent of their salary is something saved and everyone participates. Most of my employees seem to be interested in the salary vs the 401K

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Re: Employer won't Match 401k. Why?

Post by smitcat » Mon Sep 17, 2018 10:50 am

Vanguard Fan 1367 wrote:
Mon Sep 17, 2018 9:53 am
gasman wrote:
Sun Sep 16, 2018 7:02 pm
As a former small business owner that was involved in recruiting I can tell you that we did no get much bang for our buck for our generous 401k match. The large majority of candidates compared us to our competition on starting salary. That was what they chose to care about. So we went the safe harbor 3% route and bumped our starting salary. BTS these were six figure professionals who were overwhelmingly in favor of the change.
I appreciate your posting. I have wondered if going the Safe Harbour 3 percent route was the best way to go for the employees. Maybe it is. At least 3 percent of their salary is something saved and everyone participates. Most of my employees seem to be interested in the salary vs the 401K
No- not everyone participates even with a Safe Harbor 3% match. They must still elect to either join the plan or stay in the plan. It is my experience that less than 25% will participate long term (2+ yrs) even when matching at 3% or higher.

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Re: Employer won't Match 401k. Why?

Post by Vanguard Fan 1367 » Mon Sep 17, 2018 11:02 am

smitcat wrote:
Mon Sep 17, 2018 10:50 am
Vanguard Fan 1367 wrote:
Mon Sep 17, 2018 9:53 am
gasman wrote:
Sun Sep 16, 2018 7:02 pm
As a former small business owner that was involved in recruiting I can tell you that we did no get much bang for our buck for our generous 401k match. The large majority of candidates compared us to our competition on starting salary. That was what they chose to care about. So we went the safe harbor 3% route and bumped our starting salary. BTS these were six figure professionals who were overwhelmingly in favor of the change.
I appreciate your posting. I have wondered if going the Safe Harbour 3 percent route was the best way to go for the employees. Maybe it is. At least 3 percent of their salary is something saved and everyone participates. Most of my employees seem to be interested in the salary vs the 401K
No- not everyone participates even with a Safe Harbor 3% match. They must still elect to either join the plan or stay in the plan. It is my experience that less than 25% will participate long term (2+ yrs) even when matching at 3% or higher.
Sorry. I have a Safe Harbor with a non-elective 3 percent contribution. All get the 3 percent and there is no matching. If they want to contribute their salary up to 18k or so before taxes they are welcome to do that.

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Re: Employer won't Match 401k. Why?

Post by Vanguard Fan 1367 » Mon Sep 17, 2018 11:02 am

smitcat wrote:
Mon Sep 17, 2018 10:50 am
Vanguard Fan 1367 wrote:
Mon Sep 17, 2018 9:53 am
gasman wrote:
Sun Sep 16, 2018 7:02 pm
As a former small business owner that was involved in recruiting I can tell you that we did no get much bang for our buck for our generous 401k match. The large majority of candidates compared us to our competition on starting salary. That was what they chose to care about. So we went the safe harbor 3% route and bumped our starting salary. BTS these were six figure professionals who were overwhelmingly in favor of the change.
I appreciate your posting. I have wondered if going the Safe Harbour 3 percent route was the best way to go for the employees. Maybe it is. At least 3 percent of their salary is something saved and everyone participates. Most of my employees seem to be interested in the salary vs the 401K
No- not everyone participates even with a Safe Harbor 3% match. They must still elect to either join the plan or stay in the plan. It is my experience that less than 25% will participate long term (2+ yrs) even when matching at 3% or higher.
Sorry. I have a Safe Harbor with a non-elective 3 percent contribution. All get the 3 percent and there is no matching. If they want to contribute their salary up to 18k or so before taxes they are welcome to do that.

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Re: Employer won't Match 401k. Why?

Post by wootwoot » Mon Sep 17, 2018 11:08 am

@OP, your employer is cheap. The few companies that I've dealt with that didn't offer 401k matching were also cheap on other benefits like health care and pay. Generally speaking, employers with higher 401k matches usually have better benefits overall.

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Re: Employer won't Match 401k. Why?

Post by smitcat » Mon Sep 17, 2018 11:20 am

Vanguard Fan 1367 wrote:
Mon Sep 17, 2018 11:02 am
smitcat wrote:
Mon Sep 17, 2018 10:50 am
Vanguard Fan 1367 wrote:
Mon Sep 17, 2018 9:53 am
gasman wrote:
Sun Sep 16, 2018 7:02 pm
As a former small business owner that was involved in recruiting I can tell you that we did no get much bang for our buck for our generous 401k match. The large majority of candidates compared us to our competition on starting salary. That was what they chose to care about. So we went the safe harbor 3% route and bumped our starting salary. BTS these were six figure professionals who were overwhelmingly in favor of the change.
I appreciate your posting. I have wondered if going the Safe Harbour 3 percent route was the best way to go for the employees. Maybe it is. At least 3 percent of their salary is something saved and everyone participates. Most of my employees seem to be interested in the salary vs the 401K
No- not everyone participates even with a Safe Harbor 3% match. They must still elect to either join the plan or stay in the plan. It is my experience that less than 25% will participate long term (2+ yrs) even when matching at 3% or higher.
Sorry. I have a Safe Harbor with a non-elective 3 percent contribution. All get the 3 percent and there is no matching. If they want to contribute their salary up to 18k or so before taxes they are welcome to do that.
Yes entirely possible - "Safe harbor non elective plans" with a 3% match are fairly rare from what we are told.

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Re: Employer won't Match 401k. Why?

Post by latesaver » Mon Sep 17, 2018 12:30 pm

ThisDinosaur wrote:
Sat Sep 15, 2018 8:11 am
A 401K can legally have up to $55.5K put into it per year. That's $18.5K pretax from the employee, up to 100% pretax match from employer, and additional 18.5K post tax from employee "if your plan allows."

First, please correct me if I got any part of that wrong.

Second, who decides and how is it decided whether your "plan allows?" My current employer does not offer a match and only allows up to 1% post tax contribution. I tried negotiating for a full match in exchange for a commensurate reduction in nominal salary, but I got nowhere.
i have tried for years to get my employer to pay me less in salary if they'll do matching. or to take their "match" out of my year end bonus. i would get less in my paycheck but it's a wash as the difference would show up in my employer's 401k contributions.

my arguments have fallen on deaf, non-boglehead ears.

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Re: Employer won't Match 401k. Why?

Post by djpeteski » Mon Sep 17, 2018 1:00 pm

ThisDinosaur wrote:
Sat Sep 15, 2018 8:11 am
A 401K can legally have up to $55.5K put into it per year. That's $18.5K pretax from the employee, up to 100% pretax match from employer, and additional 18.5K post tax from employee "if your plan allows."
If you have a strong desire to contribute up-to or near the limit of 55.5k, you will need to start your own company. You can then setup a solo 401K if you are the only employee; or, a safe harbor type plan if you do have employees. With a person that is younger than age 50, you can get to the 55.5k per year by making a salary of about 148k.

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Re: Employer won't Match 401k. Why?

Post by lotusflower » Mon Sep 17, 2018 1:09 pm

latesaver wrote:
Mon Sep 17, 2018 12:30 pm
i have tried for years to get my employer to pay me less in salary if they'll do matching. or to take their "match" out of my year end bonus. i would get less in my paycheck but it's a wash as the difference would show up in my employer's 401k contributions.

my arguments have fallen on deaf, non-boglehead ears.
Repeating what was earlier in thread, your company cannot legally do this unless they do it for all employees.

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Re: Employer won't Match 401k. Why?

Post by flamesabers » Mon Sep 17, 2018 1:25 pm

dknightd wrote:
Sun Sep 16, 2018 10:54 am
Your employer decides. If you do not like it find a new employer
+1.

If it isn't the norm for companies within your industry or if your company doesn't have problems recruiting/retaining employees, why change something that isn't broken from the perspective of your employer?

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Re: Employer won't Match 401k. Why?

Post by smitcat » Mon Sep 17, 2018 2:51 pm

latesaver wrote:
Mon Sep 17, 2018 12:30 pm
ThisDinosaur wrote:
Sat Sep 15, 2018 8:11 am
A 401K can legally have up to $55.5K put into it per year. That's $18.5K pretax from the employee, up to 100% pretax match from employer, and additional 18.5K post tax from employee "if your plan allows."

First, please correct me if I got any part of that wrong.

Second, who decides and how is it decided whether your "plan allows?" My current employer does not offer a match and only allows up to 1% post tax contribution. I tried negotiating for a full match in exchange for a commensurate reduction in nominal salary, but I got nowhere.
i have tried for years to get my employer to pay me less in salary if they'll do matching. or to take their "match" out of my year end bonus. i would get less in my paycheck but it's a wash as the difference would show up in my employer's 401k contributions.

my arguments have fallen on deaf, non-boglehead ears.
About 75% of our employees have clearly told us they want the salary and not the 401K - not fallen on deaf ears here. So we do the 401K for the minority of employees not the majority.

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Re: Employer won't Match 401k. Why?

Post by ruralavalon » Mon Sep 17, 2018 4:00 pm

smitcat wrote:
Mon Sep 17, 2018 11:20 am
Vanguard Fan 1367 wrote:
Mon Sep 17, 2018 11:02 am
smitcat wrote:
Mon Sep 17, 2018 10:50 am
Vanguard Fan 1367 wrote:
Mon Sep 17, 2018 9:53 am
gasman wrote:
Sun Sep 16, 2018 7:02 pm
As a former small business owner that was involved in recruiting I can tell you that we did no get much bang for our buck for our generous 401k match. The large majority of candidates compared us to our competition on starting salary. That was what they chose to care about. So we went the safe harbor 3% route and bumped our starting salary. BTS these were six figure professionals who were overwhelmingly in favor of the change.
I appreciate your posting. I have wondered if going the Safe Harbour 3 percent route was the best way to go for the employees. Maybe it is. At least 3 percent of their salary is something saved and everyone participates. Most of my employees seem to be interested in the salary vs the 401K
No- not everyone participates even with a Safe Harbor 3% match. They must still elect to either join the plan or stay in the plan. It is my experience that less than 25% will participate long term (2+ yrs) even when matching at 3% or higher.
Sorry. I have a Safe Harbor with a non-elective 3 percent contribution. All get the 3 percent and there is no matching. If they want to contribute their salary up to 18k or so before taxes they are welcome to do that.
Yes entirely possible - "Safe harbor non elective plans" with a 3% match are fairly rare from what we are told.
An employer match and an employer contribution are different things.

An employer match is made only if the employee contributes.

The 3% employer contribution is made whether the employee contributes or not.
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