Companies Boost 401(k) Benefits to Retain Workers
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What is the main topic discussed in this episode?
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What labor-market trends are prompting companies to change benefits now?
Here's your money briefing for Wednesday, January 19th. I'm J.R. Whelan for The Wall Street Journal. As record numbers of workers quit to find new jobs, companies have been scrambling to find ways of keeping their employees around and attracting new workers. And they're looking at more than just pay.
How do employers typically structure 401(k) matches and automatic enrollment?
Because the pandemic really kind of focused employees on the importance of certain types of benefits, I think that, you know, there's an increasing willingness on the part of employers to also be looking at their benefits package right now.
One such benefit? Retirement plans. On today's show, WSJ reporter Ann Tergesen will be here to talk about the recent trend of companies sweetening their 401k benefits. That's after the break.
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What specific changes are companies making to 401(k) matches and vesting rules?
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Employers reported having 10.6 million job openings in November, while less than 7 million people were actually looking for work. That's led to fierce competition for workers, causing some companies to sweeten their benefits packages, and namely their 401k plans, to attract employees. WSJ retirement reporter Anne Turgason joins us with more. Anne, thanks so much for being with us.
Sure, thanks for having me.
So Anne, just to set the stage here, can you briefly explain the role that employers play in 401ks?
So employers obviously offer 401 s. An increasing number of them automatically enroll their workers in 401 s to get them to save for retirement.
Why did some companies cut 401(k) matches during the pandemic and how did they respond later?
And employers also provide, they don't have to, but a very high percentage of employers that offer 401 s also provide what's called a matching contribution. So, you know, if you put in a certain amount into your plan, they will provide, you know, some form of match. Maybe it's a dollar for dollar, maybe it's 50 cents for every dollar you put in up to a limit.
So what changes are companies making now to how they help employees build savings through a 401k?
Given the sort of tightness of the labor market and the fierce competition for workers, a growing number of companies, of employers are actually increasing their matching contributions in the hopes of just as part of an overall compensation package in the hope that that's real money that people may not think of that as a form of compensation, but it really is. So if all of a sudden your employer maybe used to offer to match about 3% of the money that you put into your 401k, but now they're offering 4%, that's real money. And in order to get it, you just have to raise the contribution that you're making to your 401k. Maybe you're already contributing 10%, so that just automatically puts more money in your pocket.
Got it. So are there any other changes that employers are making, especially any that are meant to appeal to potential new workers?
There are other things that employers are doing with regard to matching contributions.
How can workers who withdrew from their 401(k) benefit from higher employer contributions now?
Some employers may be raising the match. Others may be allowing employees to immediately, right upon hire, start matching. contributing to the 401k you know some companies already allow that but other companies have in the past required new workers to wait some period of time sometimes six months sometimes a year before they can start contributing and then employers are also in some cases are loosening the rules around what's called vesting so when an employer offers a matching contribution sometimes they make employees wait a certain period of time before that money sort of becomes owned by the employee
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:00–0:35
2
What labor-market trends are prompting companies to change benefits now?
0:35–0:51
3
How do employers typically structure 401(k) matches and automatic enrollment?
0:51–1:24
4
What specific changes are companies making to 401(k) matches and vesting rules?
1:24–2:32
5
Why did some companies cut 401(k) matches during the pandemic and how did they respond later?
2:32–3:51
6
How can workers who withdrew from their 401(k) benefit from higher employer contributions now?
3:51–5:37
7
Why might employers prefer boosting 401(k) contributions over raising salaries?
5:37–7:48
8
Could companies reduce or eliminate enhanced 401(k) matches if conditions change?
7:48–9:32
Speakers
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