Like millions of her peers, my daughter graduated from college last weekend and I'm already nagging her about participating in the 401(k) plan at the university where she's working as a research assistant until she starts grad school. Needless to say, she's rolling her eyes at my nagging.
It amazes me that job hunters don't evaluate their future employer's retirement plans. While I understand that many young people are happy to have ANY job in this stinky economy -- as Arianna Huffington pointed out, the unemployment rate for those age 16 to 24 is more than 18% -- if you have a choice you should make "deferred compensation" as high a priority as the size of your paycheck. As I've pointed out in previous posts, the vast majority of 401(k) participants will have to stay on the job AT LEAST another 10 years beyond the normal retirement age because of the typical puny 3% employer matching contribution, the second lowest in the advanced world, a necessity that's not disclosed to them.
This week I had hoped to launch the first annual Best 401(k) list, citing those employers who make generous 401(k) matching contributions. Unfortunately, when I asked a company that rates retirement plans to come up with some data, I learned that many of their findings were inaccurate. And I couldn't research this because while employers who offer these plans are required to file Form 5500s in order to comply with the Employee Retirement Income Security Act and there's a website called Free-Erisa.com where these forms can be found, the generosity of the plans isn't in the form but in the "auditor's report," which isn't on Free-ERISA.com.
Unfortunately, the best I could do was fact-check a handful of "Fortune 50" companies and it appears that none of America's richest companies contribute the equivalent of 9% of pay as every employer except the self-employed are required to do in Australia. Here goes: Chevron offers a dollar per dollar match, up to 8% of pay, for Marathon and Exxon Mobil the match is 7%, and for IBM and Citibank it's 6%. (I disqualified any company whose matching contributions are made in company stock).
If you think that newer high-tech companies are more generous, think again. When I contacted Apple and Google, which have been known to lure programmers with generous paychecks, media representatives at Apple didn't return my calls and a Google spokesperson said it was "unable to participate." So I found out Google's benefits myself by -- surprise, surprise -- googling "Google" and "benefits" and finding out that their 401(k) plan features the typical measly 50% matching contribution up to 6% of compensation (a similar search for Apple's plan didn't turn up anything.)
Google CEO Sergey Brin should realize if he wants to attract more future Sergeys he ought to offer them the deferred compensation they deserve, not just gyms, laundry rooms and massage parlors. If Google and other frugal companies aren't willing to offer adequate retirement plans, they ought to be required to make their stinginess public so that prospective and current employees can look elsewhere.
Ari Nave
arinave.com
by the way, when compared to australia, google's plan is a kinda lame but more and more companies are doing away with the match entirely. it is sad to say, but the 50% match up to 6% (employee puts in 6% of gross salary and employer matches with 3%) is positively generous these days.
please shine more light on this dark subject.
I strongly doubt that Brin's personal career decisions were influenced at all by retirement compensation issues. Retirement concerns are the fixation of the sort of time servers that Brin isn't going to want in his organization. The gyms, laundry rooms and massage parlors are designed to enhance performance now; not cater to the donkey following the carrot hung in front of their nose for 40 years. If a primary motivation for you is a pension; then you are no Sergey Brin.
You'd think someone was a complete idiot not to ask what the potential salary is for a position when they go in for an interview. The same should be said for the benefit plans, a major feature of which is the 401k matching. Any company will disclose full details of their benefits to any prospective employee. This stuff isn't secret. Benefits are just as relevant to your choice of employer as salary is (or at least it should be). If you don't like the benefits an employer provides, or think that you can get better benefits elsewhere...don't work for them.
"Employee Savings Plan
The Company has an employee savings plan (the “Savings Plan”) qualifying as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Under the Savings Plan, participating U.S. employees may defer a portion of their pre-tax earnings, up to the IRS annual contribution limit ($16,500 for calendar year 2009). The Company matches 50% to 100% of each employee’s contributions, depending on length of service, up to a maximum 6% of the employee’s eligible earnings. The Company’s matching contributions to the Savings Plan were $59 million, $50 million and $39 million in 2009, 2008 and 2007, respectively. "
Presumably available for every other public company in the same place.
http://www.sec.gov/Archives/edgar/data/47217/000104746910010444/a2201180z10-k.htm#fu45101_note_16__retirement_an__fu402061
My first full time permanent job out of college was before there were 401K's. But the company had an excellent profit sharing program. A few years later when 401K's became popular, this company had a meager "me too" program. After seven years of employment, until the company was sold, I received generous profit sharing contributions. After seven years, the amount in my profit sharing fund was greater than my gross pay for all seven years.
Today I run my own company. I have a respectable but ordinary 401K program: dollar for dollar up to 4% of pay. But I kick back 50% of company profits to the profit sharing plan. My employees have a chance to do extremely well.
My point is, look at the entire compensation package, including profit sharing and bonuses, when assessing the value of a job.
Fortune 500s do.