Best 401k Employer Match Structure

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rkhusky
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Re: Best 401k Employer Match Structure

Post by rkhusky » Mon Dec 18, 2017 8:00 am

1% with no contribution required. 50% match on the first 10%. 1 year vesting.

lostinjersey
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Re: Best 401k Employer Match Structure

Post by lostinjersey » Mon Dec 18, 2017 8:15 am

One last comment. As an employer I would stick with a simple formula, for ease of administration and to keep it easy for employees to calculate. 109% of 6% is a lot easier to grasp and check in my head than something like 100% of the first 4% and 50% of the next 4%, even though they are mathematically equal (if the employee defers at least 8%).

Yes the employ has to defer more to get the full match in version 2 (8% vs 6%) but the additional complexity is not worth it IMO.

One caveat - at your pay levels I would ensure that your plan doesn’t fail the ADP/ACP tests. That will cause refunds to some of your ees and would be a huge downside if it happened. A safe harbor match would ensure it doesn’t, and I would make sure my plan had that feature.

blastoff
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Re: Best 401k Employer Match Structure

Post by blastoff » Mon Dec 18, 2017 8:17 am

Make the terms at least competitive and with good fund choices.

Some kind of structure that encourages most to participate might wind up being most beneficial to all.

capsaicinguy
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Re: Best 401k Employer Match Structure

Post by capsaicinguy » Mon Dec 18, 2017 8:47 am

Mayo clinic now does 50% of the first 4% (aka 2%) for employment years 0-15, then 75% of first 4% for years 15-20, then 100% of 4% for years 20+. They just changed over to that in the last few years and stopped vesting employees into the pension, which they stopped contributing to in lieu of the above direct 401k/403b contributions. Former employee here.

employer
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Re: Best 401k Employer Match Structure

Post by employer » Mon Dec 18, 2017 4:51 pm

lostinjersey wrote:
Mon Dec 18, 2017 7:48 am
MarkBarb wrote:
Mon Dec 18, 2017 7:23 am
For those of us on the old defined benefit pension plan, the 401K match is 100% for the first 6% and vesting is in 3 years. People that arrived after the end of the defined benefit pension get a better 401K deal. I don't know the details of it. My only 401K complaint is that if you hit the federal limit and stop contributing, they stop matching. At my old company, we had a similar setup, but they would continue to put in their 6% if you hit the federal limit.
This is a very good point. Having a match true-up at the end of the year ensures that anyone whose match dipped below the max on some paychecks, but made it up on others, is made whole. It does away with all the deferral-adjusting machinations to hit the max deferral on the last paycheck, and lets employees front load their deferrals without fear of losing out on any match. A GREAT provision and one that employees really appreciate.
I am confused here. Are we saying that the match should be paid once per year, rather than each pay period?

McCharley
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Re: Best 401k Employer Match Structure

Post by McCharley » Mon Dec 18, 2017 6:18 pm

I like the notion of a flat 5% with no matching required. It is simple and gets people saving even if they don't feel like they have the money.

quantAndHold
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Re: Best 401k Employer Match Structure

Post by quantAndHold » Mon Dec 18, 2017 6:51 pm

The best I’ve ever had was 100% of 6%, with immediate vesting and true up, with low expense Vanguard funds. That was a megacorp. Smaller companies were more typically 25-50% of 6%, with or without pesky vesting rules.

In general, though, I would have been quite happy with any Safe Harbor plan. If you really want to annoy your HCE’s, refund a bunch of contributions to them every year. My last company matched 50% of 4%, and refunded an average of $2500 to me every January.

gougou
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Re: Best 401k Employer Match Structure

Post by gougou » Mon Dec 18, 2017 7:09 pm

My company LinkedIn (Microsoft) provides 50% match on 401K contributions up to $18000 of contribution in 2017. Vesting is immediate. It is forcing me to contribute all $18K to get the matching contribution. But I think it is a pretty competitive plan.

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Wildebeest
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Re: Best 401k Employer Match Structure

Post by Wildebeest » Mon Dec 18, 2017 8:52 pm

The current match we have is

3 % safe harbor and 1.4 % profit sharing which is provided by the employer and there is not need for a match by the employee and the employee is immediately vested.

This sounds great except the options the employees can pick from are not low cost index funds.

I was surprised to see that if you go to Brightscope: https://www.brightscope.com/ratings/ where they rate 401 Kplans that if companies have low cost indexfunds they score better than having great matches but high cost funds.

Somebody has to pay for the plans and if you do not know who does it more likely than not it is YOU!

My personal favorites are the options for the 401K to offer Self Directed Brokerage Account to DFA funds, Institutional Index Funds etc and options to do a Mega Back door Roth.
The Golden Rule: One should treat others as one would like others to treat oneself.

drk
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Re: Best 401k Employer Match Structure

Post by drk » Mon Dec 18, 2017 11:21 pm

gougou wrote:
Mon Dec 18, 2017 7:09 pm
My company LinkedIn (Microsoft) provides 50% match on 401K contributions up to $18000 of contribution in 2017. Vesting is immediate. It is forcing me to contribute all $18K to get the matching contribution. But I think it is a pretty competitive plan.
As I mentioned above, Microsoft's plan also allows after-tax contributions up to the IRS limits. It's really the cat's meow.

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walletless
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Re: Best 401k Employer Match Structure

Post by walletless » Mon Dec 18, 2017 11:40 pm

My employer matches 50% upto federal Max (i.e. 9k in 2017)
This has definitely encouraged several employees to contribute the federal Max of 18k in 401k. However, this probably has very little impact on hiring, I think, since most people are finance-illiterate & don't consider 401k in their decision making.

gougou
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Re: Best 401k Employer Match Structure

Post by gougou » Tue Dec 19, 2017 3:24 pm

drk wrote:
Mon Dec 18, 2017 11:21 pm
gougou wrote:
Mon Dec 18, 2017 7:09 pm
My company LinkedIn (Microsoft) provides 50% match on 401K contributions up to $18000 of contribution in 2017. Vesting is immediate. It is forcing me to contribute all $18K to get the matching contribution. But I think it is a pretty competitive plan.
As I mentioned above, Microsoft's plan also allows after-tax contributions up to the IRS limits. It's really the cat's meow.
Could you educate me on how the after-tax contributions work? Much appreciated.

I just want to add that my income is over the Roth IRA limit "$194,000 for individuals who are married and file a joint tax return" so I thought I was not eligible for anything other than a 401k.

cherijoh
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Re: Best 401k Employer Match Structure

Post by cherijoh » Tue Dec 19, 2017 3:37 pm

employer wrote:
Sun Dec 17, 2017 5:32 am
I am setting up a 401k for my employees.

I am looking for an employer match structure that would be well-received by employees.

New hires will generally receive offers with compensation between $120,000 and $140,000 per year and can expect increases of 5% to 10% per year.

Obviously the "the sky is the limit" when it comes to possible match structures, but I am looking for something that will be competitive--especially when candidates are receiving offers from local companies:
  • Apple: 50% of first 6% of compensation.
  • Facebook: 50% of first 7% of compensation.
  • Google: 100% up to $3000.
  • IBM: 100% of first 5% of compensation.
  • Lawrence Berkeley National Laboratory: 100% of first 6% of compensation.
(I found this information online--not sure it is completely accurate.)

I would like to have a generous, but reasonable and effective match structure that is attractive to employees, and gets me the most "bang-for-the buck" with my contribution. As always, looking forward to your replies.
If you can swing it, I'd go with a plan that meets the 401k safe harbor guidelines. Check out the following post from the IRS. Otherwise you (and your employees) have to worry about the Highly compensated employee rules which are a pain in the you-know-where.

bada bing
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Re: Best 401k Employer Match Structure

Post by bada bing » Tue Dec 19, 2017 3:59 pm

gougou wrote:
Tue Dec 19, 2017 3:24 pm
drk wrote:
Mon Dec 18, 2017 11:21 pm
gougou wrote:
Mon Dec 18, 2017 7:09 pm
My company LinkedIn (Microsoft) provides 50% match on 401K contributions up to $18000 of contribution in 2017. Vesting is immediate. It is forcing me to contribute all $18K to get the matching contribution. But I think it is a pretty competitive plan.
As I mentioned above, Microsoft's plan also allows after-tax contributions up to the IRS limits. It's really the cat's meow.
Could you educate me on how the after-tax contributions work? Much appreciated.

I just want to add that my income is over the Roth IRA limit "$194,000 for individuals who are married and file a joint tax return" so I thought I was not eligible for anything other than a 401k.
The IRS absolute maximum annual contribution to a 401K allowed is $54K. That includes the employer match.
The maximum deductible employee contribution is $18K. Some plans allow employee after tax contributions
after the employee has reached the $18K deductible limit as long as the annual total, all source contribution
is below $54K. This is by no means universal and most 401K plans do not allow after tax contributions. The plans that allow
it are generally from large employers in well compensated industries. The over age 50 "catch up" contribution of
$6000 is in addition to these limits. So it is possible for an employee over 50 years old to shelter up to $60K in 2017
in his/her 401K plan.

If a 401K plan allows after tax contributions and also allows in service withdrawals or in plan conversions, it is
possible to do what is called a "mega backdoor Roth". What you do is contribute after tax money into a 401K and
then either roll it out into a Roth IRA or convert it within the plan into Roth 401K balances. This isn't subject to
pro-rata calculations or IRA contribution limits. You can still do a regular backdoor Roth IRA contribution in
addition to this "mega" backdoor Roth. It all hinges on having a 401K plan that allows after tax contributions and
in service withdrawals.

Google "backdoor Roth" and "mega backdoor Roth" for two ways to contribute more into Roth space for people that
earn too much to qualify for a direct deductible or Roth IRA contribution.

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3CT_Paddler
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Re: Best 401k Employer Match Structure

Post by 3CT_Paddler » Tue Dec 19, 2017 11:19 pm

Previous employer matched 8% on the first 4%, and an additional 8% in profit sharing. It was pretty spectacular, and sorely missed. I don't miss the long hours that made it possible.

sco
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Re: Best 401k Employer Match Structure

Post by sco » Tue Dec 19, 2017 11:32 pm

The key is the vesting, Throw in a 3-5 year vesting and new young employees aren’t going to be as excited.

100% match up to 6% 1 year vesting until you have 1 year with the company, after that it is vested immediately. They used to lump sump a profit sharing as well, not anymore.

It has varied over the years but tends to always go back to a 1 to 1 match.

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Wildebeest
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Re: Best 401k Employer Match Structure

Post by Wildebeest » Tue Dec 19, 2017 11:44 pm

If i had another opportunity at creating 401 K plan I would create an automatic enrollment factor:

https://www.forusall.com/401k-blog/401k ... etirement/
The Golden Rule: One should treat others as one would like others to treat oneself.

gpburdell
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Re: Best 401k Employer Match Structure

Post by gpburdell » Tue Dec 19, 2017 11:54 pm

I work for a top 15 bank and they match 100% of the first 6%. Also there is an optional 0-4% (of salary) that could be added based on company performance. It's been this way for several years since the pension plan was frozen.

Hug401k
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Re: Best 401k Employer Match Structure

Post by Hug401k » Thu Dec 21, 2017 4:36 pm

I've looked at a lot of megacorp 401k plans. I would say the most common is 50% on 6%. Anything below that is poor. That actual match won't impress many. You should start above that point, in my opinion. 100% on 6% would likely be viewed as pretty strong. I like a 3 year vesting schedule personally, unless you want to spring for immediate.

bloom2708
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Re: Best 401k Employer Match Structure

Post by bloom2708 » Thu Dec 21, 2017 4:40 pm

My megacorp matches 50% of everything to the $18k limit. $9k match.

I am not sure if I will get another $250 match with the new $18.5k limit next year. I plan to find out.
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CFOKevin
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Re: Best 401k Employer Match Structure

Post by CFOKevin » Thu Dec 21, 2017 4:45 pm

I'd recommend what I've done. Dollar for dollar match on first 4%, immediately vested.

Best I ever saw was a friend who worked at VISA 20 years ago. They offered a 4x match. Pretty spectacular and provided for a loyal workforce.

Kevin

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Thrifty Femme
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Re: Best 401k Employer Match Structure

Post by Thrifty Femme » Thu Dec 21, 2017 6:33 pm

My previous employer was 53% match of regular contribution up to 15% of eligible compensation per pay period with a true up in February of the next year if you were employed on December 31. Vesting was six years though.

5280Tim
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Re: Best 401k Employer Match Structure

Post by 5280Tim » Thu Dec 21, 2017 8:27 pm

With our company, we get a 50% match up to the IRS max of $18k. Vesting is immediate, but the match is deposited quarterly. If you leave before the match is dispersed, you miss that quarter’s match

MrPotatoHead
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Re: Best 401k Employer Match Structure

Post by MrPotatoHead » Thu Dec 21, 2017 9:53 pm

employer wrote:
Sun Dec 17, 2017 5:32 am
I am setting up a 401k for my employees.

I am looking for an employer match structure that would be well-received by employees.

New hires will generally receive offers with compensation between $120,000 and $140,000 per year and can expect increases of 5% to 10% per year.

Obviously the "the sky is the limit" when it comes to possible match structures, but I am looking for something that will be competitive--especially when candidates are receiving offers from local companies:
  • Apple: 50% of first 6% of compensation.
  • Facebook: 50% of first 7% of compensation.
  • Google: 100% up to $3000.
  • IBM: 100% of first 5% of compensation.
  • Lawrence Berkeley National Laboratory: 100% of first 6% of compensation.
(I found this information online--not sure it is completely accurate.)

I would like to have a generous, but reasonable and effective match structure that is attractive to employees, and gets me the most "bang-for-the buck" with my contribution. As always, looking forward to your replies.
IBM's 401K also does not give an employee any match AT ALL unless they are still employed on Dec 15th. So if IBM terminated you Dec 14th you get nothing for the entire year. That has generated much ill will.

That being said I would offer a full feature plan, especially since your employees are high income and would benefit tremendously from it. A good plan would featured and after tax option as well as in service withdraws (thus enabling the mega backdoor Roth option) and of course in place conversions. And I would sell those features to the employees.

lostinjersey
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Re: Best 401k Employer Match Structure

Post by lostinjersey » Sat Dec 30, 2017 2:31 pm

employer wrote:
Mon Dec 18, 2017 4:51 pm
lostinjersey wrote:
Mon Dec 18, 2017 7:48 am
MarkBarb wrote:
Mon Dec 18, 2017 7:23 am
For those of us on the old defined benefit pension plan, the 401K match is 100% for the first 6% and vesting is in 3 years. People that arrived after the end of the defined benefit pension get a better 401K deal. I don't know the details of it. My only 401K complaint is that if you hit the federal limit and stop contributing, they stop matching. At my old company, we had a similar setup, but they would continue to put in their 6% if you hit the federal limit.
This is a very good point. Having a match true-up at the end of the year ensures that anyone whose match dipped below the max on some paychecks, but made it up on others, is made whole. It does away with all the deferral-adjusting machinations to hit the max deferral on the last paycheck, and lets employees front load their deferrals without fear of losing out on any match. A GREAT provision and one that employees really appreciate.
I am confused here. Are we saying that the match should be paid once per year, rather than each pay period?
Employer, I apologize, I missed this question and don't see that it's been answered. I just posted on another true-up thread, but I will reply to your specific question here. No, I am not saying the match should be paid once per year. It should be paid per-payroll, and then a single, final true-up match contribution is paid after the year ends.

The true-up comes into play when the match is paid each pay period, but an employee for whatever reason doesn't contribute enough each pay period to get the full match, but does on an annual basis. After the year ends, the company looks at each employee's annual deferral and annual match percentages, and determines if anyone contributed enough on an ANNUAL basis to get the full match, but somehow missed out due to not contributing enough on a PAY PERIOD basis. If so, they will 'true-up' that person by depositing additional match to their account after the year has ended.

Example 1: John's company matches 100% up to 6% of pay. John contributes 6% the first six months, then has a family emergency and drops to 0% for two months. He then bumps up to 15% for the remaining four months. On an annual basis, John will be over 6%, but will not have received any match for the two months he ceased deferrals. The true-up will catch this and give him the extra (6% x 2 months pay) match.

Example 2: Jane's company matches 50% up to 10% of pay. Jane front loads her deferrals by deferring 20% of pay ($18,000) by June 30, with $4,500 in match (50% of the max 10%). Jane defers nothing the rest of the year. The true-up will ensure that she gets the full $9,000 in match since she met the 10% of pay threshold on an annual basis.

The true-up can't be calculated until the year is over and the annual pay and employee/match contribution amounts and rates are determined. It's an extra administrative step and of course has a cost (the additional match deposited after year-end) but is a very nice perk for employees since it makes their max-the-match calculations much more straightforward than if the per-payroll basis (with no true-up) is applied.

Pessimist55
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Re: Best 401k Employer Match Structure

Post by Pessimist55 » Sun Dec 31, 2017 2:55 am

Oracle: 6% match w a 4yr vest schedule. Fidelity.good cheap funds.tond selection

Pypl/eBay 4% w true up next pay period. No vest. Has limited cheap funds. Schwab.

INTU
Forgot the percentages(1.25x contribution), Up to $10k match. YR 1 50% vest yr 2 100%. Very Limited plain vanilla funds w SSGA but dirt cheap. All VG lifecycle funds. Brokerage option at a cost of $48 annually

WL2034
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Re: Best 401k Employer Match Structure

Post by WL2034 » Sun Dec 31, 2017 3:28 am

aarsmith54 wrote:
Sun Dec 17, 2017 1:20 pm
My company funds my 401k to the IRS maximum $55k without requiring any contributions from me. I am also fully vested immediately. This is in lieu of a higher salary (I make less than $100k).
This seems an interesting strategy by an employer. As a boglehead, I would love it if my employer paid me less in exchange for more tax deferred savings each year, but I wonder how it is perceived by the majority of perspective employees. Since most people don’t save so aggressively for retirement, does this plan put off some people due to lower take home pay?

My employer 401k is 25% match of first 4% increasing yearly over 4 years to 100% match of 4%.

There is a base contribution in addition to the matching which is an additional 4% of salary beginning after 3 years.

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watchnerd
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Re: Best 401k Employer Match Structure

Post by watchnerd » Sun Dec 31, 2017 1:10 pm

Microsoft offers 50% match on the total contribution.
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Earl Lemongrab
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Re: Best 401k Employer Match Structure

Post by Earl Lemongrab » Sun Dec 31, 2017 1:12 pm

Megacorp has a number of moving parts these days:

1. Basic 75% match on up to 8%, so 6% max. No true-up matching, but it will match after-tax.

2. Non-elective contribution in lieu of the pension plan that was frozen. The amount depends on the years of service.

3. The annual profit-sharing bonus can be placed in the 401(k), but counts as an employee deferral and/or Roth depending on election. It is not matched.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

nick evets
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Re: Best 401k Employer Match Structure

Post by nick evets » Sun Dec 31, 2017 1:12 pm

MrPotatoHead wrote:
Thu Dec 21, 2017 9:53 pm

IBM's 401K also does not give an employee any match AT ALL unless they are still employed on Dec 15th. So if IBM terminated you Dec 14th you get nothing for the entire year. That has generated much ill will.
And it doesn't help with dollar cost averaging, I'd imagine?

ny_knicks
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Re: Best 401k Employer Match Structure

Post by ny_knicks » Sun Dec 31, 2017 4:49 pm

Megacorp: 6% match 6% profit sharing after 1 year 100% vested immediately

MrPotatoHead
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Re: Best 401k Employer Match Structure

Post by MrPotatoHead » Wed Jan 03, 2018 1:56 am

nick evets wrote:
Sun Dec 31, 2017 1:12 pm
MrPotatoHead wrote:
Thu Dec 21, 2017 9:53 pm

IBM's 401K also does not give an employee any match AT ALL unless they are still employed on Dec 15th. So if IBM terminated you Dec 14th you get nothing for the entire year. That has generated much ill will.
And it doesn't help with dollar cost averaging, I'd imagine?
True. You end up with a big lump sum at the end of the year.

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djpeteski
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Re: Best 401k Employer Match Structure

Post by djpeteski » Wed Jan 03, 2018 6:53 am

I will assume that you plan to put in 6% per employee.

If it was me, I would do the following:

1) Make it an opt out plan. Automatically sign people up for the plan at 3%. Studies have shown much higher participation in plans where people have to opt out.

2) 100% on the first 3%.

3) 50% on the next 6%.

So if employees take full advantage of your match, they will be putting in 9%, you 6% putting them at 15% of their salary into retirement. Not shabby.

cherijoh
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Re: Best 401k Employer Match Structure

Post by cherijoh » Wed Jan 03, 2018 7:30 am

FiveK wrote:
Sun Dec 17, 2017 7:31 am
As a point of reference, see Safe Harbor 401(k) Plans: Answers To Common Questions:
Safe harbor 401(k) plans require an employer to make either an eligible matching or nonelective contribution to participants:

- Safe harbor matching contribution – 2 options are available:
1) - Basic match - 100% match on the first 3% of deferred compensation plus a 50% match on deferrals between 3% and 5% (4% total).
2) - Enhanced match – Must be at least as much as the basic match at each tier of the match formula. A common formula is 100% match on the first 4% of deferred compensation.
- Safe harbor nonelective contribution – 3% (or more) of compensation, regardless of 401(k) deferrals.
+1 on Safe Harbor plans. IIRC to make it a safe harbor plan, match also needs to vest immediately.

My megacorp matches 100% of the first 5% that an employee contributions. They also replaced a cash balance pension with a 2 - 3% non-elective contribution (depending on years of service).

Personally, I think employees should have skin in the game (vs. non-elective contributions).

sciliz
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Re: Best 401k Employer Match Structure

Post by sciliz » Wed Jan 03, 2018 9:30 am

I've got a 403(b) with a university, so not completely comparable (i.e. overall compensation is heavier on benefits relative to salary).

The program is:
After one year, employer contribution of 5% of your salary. Then a 100% match on the next 5%. Participation is optional.

My last university had a 200% match on the first 5%, which maxes at the same level but doesn't take care of people who can least afford to contribute. It vested immediately though. Participation was mandatory if you were old enough. Different categories of jobs ended up with dramatically different lengths of service before the match kicked in, or was even available.

I think my current plan is good and I philosophically prefer it to my last university as far as the match structure. Though as a tangental point I would like the option to do Roth and I do miss the 457(b) (last university was a public, so the 457(b) was governmental). My current employer also has an HSA contribution (not match, just contribution) if you choose the HDHP, so you can get some employer contributions to investments even during the first year of service. This makes the "hold period" a bit more palatable.

If I were planning a vesting schedule to "reward loyalty" I might do something like 50% immediately, 25% at the median length of employment and 25% after 2x the median length of employment. But as an employee, of course I want it 100% vested immediately. :happy

THY4373
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Re: Best 401k Employer Match Structure

Post by THY4373 » Wed Jan 03, 2018 10:13 am

Former employer of mine gave 10% of salary each year and it wasn't match (i.e., you could put nothing in and get the 10%) in addition they gave you the 6.5%(?) employer SSN match on the portion of your salary above the social security wage base + they redistributed the amounts forfeited by employees who left before vesting to the remaining employees. My ex still works for the company but they went public and pretty much gutted all this and now have a more traditional match.

Current employer gives me 1% no matter what + 100% match on first 6% so I get a total of 7% assuming I put in 6% of salary. They also put in 10% of salary in my pension/portable cash option (I put in nothing).

capsaicinguy
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Re: Best 401k Employer Match Structure

Post by capsaicinguy » Fri Jan 12, 2018 1:16 pm

As a follow up, I always thought doing a straight 25% (non-matching) contribution with corresponding reduction in hourly pay would be from a business sense great. AKA instead of paying someone 50k/year, offer 40k salary + 10k 401k contribution. As an employer you get to save some taxes on the reduction in w2 wages and get a sizeable business deduction (if I'm not mistaken). The hard part is selling the prospective employee on the pay structure. Most people need the income and aren't paying any attention to retirement. That being said, it might create a selection bias for like-minded (boglehead) employees which might not be a bad thing. :D

RetireSomeday5
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Re: Best 401k Employer Match Structure

Post by RetireSomeday5 » Fri Jan 12, 2018 1:21 pm

The company I work for is San Fran HQ in the tech industry-- I'll assume similar for you based on your competing companies. Oddly we have a 50% match up to 8%. The also don't explicit state a true-up but have offered it each year I've worked for them.

ERISA Stone
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Re: Best 401k Employer Match Structure

Post by ERISA Stone » Fri Jan 12, 2018 3:12 pm

capsaicinguy wrote:
Fri Jan 12, 2018 1:16 pm

AKA instead of paying someone 50k/year, offer 40k salary + 10k 401k contribution.
This wouldn't work for the average person. Very few people are able to trade in their salary for a 25% retirement benefit.

LawyersGunsAndMoney
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Re: Best 401k Employer Match Structure

Post by LawyersGunsAndMoney » Fri Jan 12, 2018 3:27 pm

My firm (small prof services firm) does a Safe Harbor Non-Elective Contribution equal to 3% of each employees salary (regardless if they contribute their own $ of not), and then an additional profit-sharing component that has been 4.5% on top of that (has been 4.5% for last 5 years). We use a 3 year vesting cliff for the profit-sharing component.

capsaicinguy
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Joined: Thu Sep 29, 2016 9:00 am

Re: Best 401k Employer Match Structure

Post by capsaicinguy » Fri Jan 12, 2018 4:00 pm

ERISA Stone wrote:
Fri Jan 12, 2018 3:12 pm
capsaicinguy wrote:
Fri Jan 12, 2018 1:16 pm

AKA instead of paying someone 50k/year, offer 40k salary + 10k 401k contribution.
This wouldn't work for the average person. Very few people are able to trade in their salary for a 25% retirement benefit.
Agreed, that's where theory gets run over by reality. But, if the pay/401k were taken into account within a total compensation package, maybe you find other ways to "make up" the lower w2 pay? That's probably OT as far as this thread goes but maybe gives the OP some food for thought. I had recently been thinking about this WRT (the simplest) structuring of an S-corp safe harbor plan and not running afoul of the IRS new comparability rules. (Just give everyone the 25% non-elective, but reduce pay) Can't always have your cake and eat it too. :sharebeer

mariezzz
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Re: Best 401k Employer Match Structure

Post by mariezzz » Fri Jan 12, 2018 6:11 pm

Nummerkins wrote:
Sun Dec 17, 2017 7:44 am
One important thing to look at is the vesting schedule. The traditional 6 years is nuts in my mind. I understand the attempt to build loyalty but I would try to shorten it up to instant or 3 years max.
Completely agree. I'd have to be paid a much higher salary to agree to work with an employer that had even a 2 year vesting schedule. You don't know whether it's a good employer until you get there.

Same with the IBM style match (even more so!)
IBM's 401K also does not give an employee any match AT ALL unless they are still employed on Dec 15th. So if IBM terminated you Dec 14th you get nothing for the entire year. That has generated much ill will.

GeoMetry
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Re: Best 401k Employer Match Structure

Post by GeoMetry » Sat Jan 13, 2018 3:23 pm

If you want to offer a 401k benefit that doesn't cost you much, look at what you need to do to enable your employees to take advantage of the "Mega back door Roth"

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ClevrChico
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Re: Best 401k Employer Match Structure

Post by ClevrChico » Sat Jan 13, 2018 4:54 pm

Current employer is 100% match up to 9% of salary, immediate vesting. Highly rated 401k, index funds with institutional rates.

Other benefits are also excellent. Employees tend to be very loyal and org has excellent reputation. I have no problem reciprocating and going above and beyond for company, putting extra time in, etc.

Instead of trying to merely be competitive, try to beat the other companies that you listed. The smart employees will appreciate your generosity.

P.S. - Unless something changed, Google's contribution is much higher than $3k.

GeoMetry
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Re: Best 401k Employer Match Structure

Post by GeoMetry » Sat Jan 13, 2018 6:35 pm

If you are just looking to pile on inexpensive benefits you could pay for an Amazon Prime membership for each employee only $100 per year and they will thank you every time they order from Amazon.

Billionaire
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Re: Best 401k Employer Match Structure

Post by Billionaire » Sat Jan 13, 2018 7:28 pm

50% of 6%, plus (here is the kicker) a profit sharing match up to $5,000.00 of eligible earnings. To be eligible for the profit sharing you need to be on the payroll as of 12/31. In my case, it's been in the neighborhood of a total of $9,000.00 plus, as a match each year.

Yohanson
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Re: Best 401k Employer Match Structure

Post by Yohanson » Sat Jan 13, 2018 7:59 pm

At one time ours was 100% match up to 8% of pay. Then in 2009, they changed it to 50% match up to 8% of pay. This went up to 62.5%, then 75% up to 8% of pay as the economy got better and our performance got better. Our CEO just announced last week that he raised it 1% to 7% of pay. The CEO's announcement is a bit confusing but I assume it's now 100% up to 7% of pay.

ImaBeginner
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Re: Best 401k Employer Match Structure

Post by ImaBeginner » Sat Jan 13, 2018 10:35 pm

We match 100% up to 15k and do a contribution of 12-15k per employee on top of that for our employees that make ~190k. 5 year vesting.
We have lost people to other places that pay more up front, but I don’t care. Would rather be paternalistic and force some savings for them. Plus they are doing well in a very low cost area anyways.

tindel
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Re: Best 401k Employer Match Structure

Post by tindel » Sun Jan 14, 2018 2:09 am

I'll throw out a couple companies that I just got offers from:
One of the big two aerospace companies:
Automatic 6% contribution
50% of 8% contribution
Up to 8% yearly cash bonus paid out after the year was over
I don't remember the vesting schedule

Integrated circuit manufacture:
Automatic 5% contribution - 3 year cliff
100% of the first 2% then 50% of the next 2% - 3 year cliff
Up to 30% cash bonus based on company performance paid out twice a year

I considered both jobs as benefits at each were very good. Ultimately, the one with the better bonus won even though the 401k was better with the other place (the base salary was too). I'm not crazy about a 3 year cliff though. Other factors were in play as well also though.

I've also had a job in the past with no match, but they paid 100% of the employee's health insurance. I liked this benefit too. It enabled my wife and kid to get on my wife's insurance with employee + child rate for additional savings as well. The HR/Finance woman told me I was one of the only people that contributed to the 401k there.
Last edited by tindel on Sun Jan 14, 2018 1:27 pm, edited 1 time in total.

basspond
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Re: Best 401k Employer Match Structure

Post by basspond » Sun Jan 14, 2018 4:47 am

If your company does not provide a pension then I would suggest to do a percentage of salary that is automatically provided by your company and then kick in a match. For example a 3% automatic match with an extra 50% match up to 6% of what the employee contributes.

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