When we hear about significant changes to a high-profile 401k plan, our ears perk up. That was the case when The Wall Street Journal reported recently that Meta, Facebook’s parent company, decided to double its 401k match in an effort to better attract and retain top talent in today’s challenging hiring environment.
As of Jan. 1, 2022, Meta Platforms Inc. raised its 401k match to a dollar for every dollar its employees contribute, up to $10,250 this year, or $13,500 for those 50 and older. That’s up from a prior match of 50% of participant contributions up to 7% of pay.
The move was mentioned as further evidence of a trend showing companies are sweetening retirement plan contributions as a way to combat The Great Resignation. The Journal cited a Callan survey from last fall that found about 16% of large and midsize employers plan to raise their 401k contributions or reinstate a previously suspended match in 2022, while another 8% said they are considering such a move. That 24% combined total is a big boost compared to 2021, where Callan found a combined total of only about 12% took similar action.
Backing up the Callan survey, nearly three in four employees in a Betterment survey released in December 2021 said they would likely leave their job for an employer that offered better financial benefits—in particular “a high-quality 401k or other retirement plan,” cited by 65% of respondents, and “a 401k matching program,” cited by 56% of respondents.
Among younger generations this was especially true, as 79% of Millennials and 84% of Gen Z said they would leave their current job for one with better benefits. A majority of respondents said they highly value financial wellness offerings—with 68% saying they would prioritize them over an extra week of vacation.
KPMG, Boeing also make changes
The Journal story also noted that Big Four accounting firm KPMG recently made big improvements to its 401k plan, something we reported on last November. KPMG froze contributions to its defined benefit pension plan and replaced its 401k match with an automatic firm contribution of up to 8% of W-2 pay—with no requirement that employees contribute to the plan.
Employees are of course still encouraged to contribute to their own plans, but now get the company contribution regardless based on tenure. Employer contributions vest after three years of service. KPMG’s 401k plan is estimated at $6 billion with approximately 44,600 participants, qualifying it as a “jumbo” plan.
Another “jumbo” 401k plan announcing improvements for 2022 includes Boeing, which now offers a dollar-for-dollar match on the first 10% of base and incentive pay for nonunion employees who contribute to The Boeing Company 401k Retirement Plan.
Boeing previously matched 75 cents on the dollar for up to 8% of base pay an employee contributes. The company did eliminate the automatic contribution of between 3% to 5% that it previously made as part of the changes.
Boeing offers immediate 100% vesting, and those who are active nonunion employees as of Dec. 31, 2022 and 2023 will also get an additional 2% contribution from Boeing. Boeing also announced that Fidelity would be the $70 billion plan’s service provider moving forward, and would also become the service provider for Boeing pension plans in July 2022.
More generous matches
Dave Stinnett, head of strategic retirement consulting at Vanguard Group, told the Journal that employers are very nervous about The Great Resignation, and that Vanguard has gotten more questions from clients about raising their matches than any other topic over the past six months.
He said those taking action are typically boosting their match by one or two percentage points or are making one-time contributions on top of the match.
A 2021 study from Brightscope and the Investment Company Institute found that among the majority of large 401k plans with employer contributions (as of 2018) that have simple match formulas, the most common formula (used by 22% of large 401k plans with simple matches) was matching 50% of contributions up to 6% of employee salary.
The next most common simple match formula (used by 13% of large 401k plans with simple matches) was a match of contributions 100% up to 4% of employee salary. Altogether, the most common match rates for employer contributions were 50% (used by 42% of large 401k plans with simple matches) and 100% (used by 35% of large 401k plans with simple matches).
The same study found that in 2018, 87% of large 401k plans (which covers more than nine out of 10 401k participants) had employer contributions.
SEE ALSO:
• KPMG Makes Company 401k Contribution Automatic
• A Better 401k Cited as Top Reason to Switch Jobs
• Employer Contributions Now Widespread in 401k Plans
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
