2014
Employers that hold their match on the company 401k plan to year-end save money; they get to use the money throughout the year and avoid paying the match to employees who leave before year end. That’s true.
A New York Times editorial talking about the AOL reversal of this policy said this:
If stocks are rising, as they have been in the last few years, that means the lump sum will be invested in the market when stocks are more expensive than if they were purchased throughout the year.
I guess that’s true, but couldn’t the opposite also be true? Or couldn’t the money be invested just at a market downturn to the advantage of employees?
No matter; the right thing to do is to make the match each pay day and to vest it immediately. Given the 401k is the sole retirement vehicle for most workers, it needs to be done right.
QUINNSCOMMENTARY 
Not sure of your logic here. To avoid the administration of graded vesting I put in immediate vesting nearly ten years ago with hardly any cost difference (granted perhaps unique to a certain extent to our workforce) and a lot of good will. 401ks were supposed to be good because they were portable so it all should be portable all the time. Employers are making out quite well especially if it’s in lieu of a DB plan.
However, I agree there should be a profit sharing component as well either part of or in addition to a basic match level depending on the company.
LikeLike
Just not so. Fact is that in a 401k, just a few years ago, you could treat the co match the same as a db plan – with a five year cliff vesting method. Today, with either 2 year cliff or graded vesting, the fact is that the company match is more like part of a deferred comp plan and less like a retirement savings plan. Soon, expect less in form of a match and more profit sharing allowing employer control.
LikeLike