Costs are falling and contributions are rising. A consequence of fee litigation?
Whatever the reason, it’s good (or at least better) for workers at large U.S. companies.
“Microsoft Corp. and Host Hotels & Resorts Inc. are among a growing number of companies boosting contributions to 401(k) plans because some workers aren’t saving enough, a move many firms have long resisted because of the costs,” The Wall Street Journal reported Monday.
It cites Vanguard data from the fund behemoth’s Center for Investor Research, noting the average company contribution to 401k plans rose to an estimated 4.7 percent of employee salaries in 2016, up from 3.9 percent in 2015, adding it’s the highest percentage and biggest year-to-year jump since at least 2007.
“Some companies in certain industries say they need to spend more to retain the best employees and motivate staff. They also need to ensure that older, relatively expensive workers can afford to retire on time and make way for younger staff, retirement specialists said. Employees who don’t have adequate nest eggs will stay in their jobs longer and add to a company’s overall health-care costs.”
“We weren’t getting people to the 15 percent” contribution level retirement advisers recommend, Karen Montague, director of total rewards at Host Hotels, a real-estate investment trust that owns properties run by big hotel chains such as Hilton Worldwide and Marriott International Inc., told the paper.
In April, Host therefore increased its company match and now chips in 50 cents of every dollar its 220 employees invest in its 401k plan, up to 8 percent of their salary, an increase from the previous 6 percent limit.
Last year, Microsoft started matching half of all employee contributions up to federal limits, with $150 million more in contributions to its $17 billion retirement s plan.
The result was “52 percent of Microsoft workers had maximized the amount of pretax money they contributed to the plan, up from 36 percent in 2015, the company said. That was half the time the company’s research suggested it could take to get 50 percent of its employees to maximize the amount they contributed.”