Employees are being told to save more and more in their workplace 401(k)s. What about employers chipping in more? In a recent survey of global employers, Vanguard found that 57% of global employers expect to increase the level of company contributions to their employees? 401(k) accounts in the next five years, and another 14% of them expect to increase contributions dramatically.
There are two main ways employers can contribute to employees? 401(k) plans. The first and most commonly used is the employer match?that?s where your employer makes contributions on your behalf based on how much you save. The second way is by making non-matching contributions?variable or fixed profit ?sharing contributions or an employee stock ownership plan contribution. Unlike matching contributions, employees get these non-matching contributions whether or not they contribute any part of their pay to the plan.
The global trend reflects a trend that?s already underway in the U.S., according to Vanguard?s How America Saves 2014. The amount of match money U.S. employers doled out between 2005 and 2013 was steady, but between 2010 and 2013, the value of non-match contributions rebounded and surpassed pre-recession levels. In part that?s because employers have been bumping up non-matching contributions as a way to make good on the promise of a secure retirement after closing or freezing defined benefit pensions for workers?although for many workers the pension dollars would have been worth far more. The initial shift from old-fashioned defined benefit pension plans to 401(k) plans meant that responsibility for retirement savings shifted from employers to employees. But now, Vanguard says, there is a growing recognition that there must be more of a shared responsibility, including greater employer contributions.
Read more at FORBES
