Dishing About Salary and Benefits With Friends
My friends and I do talk about our salaries when someone changes jobs or gets a promotion, as the New York Times reported this weekend that many younger workers do. It described talking about money as a taboo for older workers that doesn't apply to the under-35 crowd. But I think the trend goes further than that.
We talk about the entire compensation package, from the nitty-gritty of what our health plans cover and how much we shell out for deductibles and copays to exactly how our 401(k) works. In this confusing era of do-it-yourself retirement (I have yet to meet a 20-something like me who has a defined-benefit retirement plan), it's the only way we can parse investment choices and 401(k) fees and find out if our retirement savings are on track compared with other people our age who have similar incomes.
Although none of my close friends have yet ventured into the world of financial exhibitionism, casually talking about our 401(k) plans also helps us determine whether a company is offering us a fair shake at retirement security by contributing as much as other employers do.
So here's a little help for those curious about how their benefits stack up. Company contributions to 401(k) plans average 3 percent of pay, according to the Profit Sharing/401(k) Council of America, but numerous formulas are used to determine what the company puts in.
The most common 401(k) recipe is a fixed match, present in 29.5 percent of plans in 2006, according to a PSCA survey. The most popular matches include 50 cents per dollar contributed by the employee up to the first 6 percent of pay, one dollar per dollar up to the first 4 percent of pay, and one dollar per dollar up to the first 3 percent of pay.
Some companies have more complicated formulas, including matching dollar for dollar the first 3 percent of your salary that you contribute and then 50 cents on the dollar for the next 2 percent. Other outfits match as little as 25 cents on the dollar, if they offer a match at all.
Almost all companies allow catch-up contributions for employees over age 50, but slightly less than a third of the companies surveyed will match any portion of that, PSCA found.
Also, about 40 percent of plans offer immediate vesting for matching contributions, while others have graduated vesting. So you can't always keep money contributed by your employer unless you stay with the company for a certain amount of time.
So, readers, when you get together with friends, do you ever talk about your employer's retirement plan?
Tags: retirement | 401(k)
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Dishing About Salary and Benefits With Friends
I would love to hear what you and your friends have to say. I am the head of compensation and benefits at a mid-size software company, and do believe that the plans, industry and legislative environment have contributed to the confusion rather than helping individuals understand what they need to know.
We do more than most companies to try to educate our employees, by conducting monthly seminars, ranging on topics from retirement to adoption assistance, and have recently rolled out a competency module designed to help our employees understand what is required if they want to continue to advance their career.
However, salary tends to be a very personal conversation. I have negotiated deals from Secretaries to C-Suite Executives, and at the end of the day, it still comes down to a very personal negotiation. Sometimes people are concerned whether they will be sponsored by the company for the country club membership, and other times, they are concerned about whether or not we will pay for their degree. Most companies have a very narrow range that they will negotiate on salary based on a combination of internal and external factors.
What's really interesting, is that the corporate employers have accepted the job of providing benefits to the masses, without ever being told that they have to. There is no law which requires companies to provide benefits. The Defined Benefit pension plans got into trouble when Nafta included a clause which tied the pension funding to the prime lending rate, rather than being set by the PBGC, and as a result only about 10% of private pensions have remained. In other words the PBGC was holding down the funding requirements, when it shifted to the prime rate, companies couldn't afford the pensions, so they looked to get out.
If we are not careful, Health Care could go the way of pensions. Health Care is a national issue, and one that increases every year at a double digit rate. I'm not sure how much your company increases subscription fee's but I'm sure it's not double digit...nor does my company.
I've read recently that folks making $40k / year are starting to go without healthcare due to the cost....and when they get sick, they visit the ER...and sometimes they will pay, but if they can't the hospitals and insurance companies write the debt off and as a result your premium and mine increase at double digit rates to pay for the folks who don't have insurance.
I really enjoyed your article, and again would love to hear more.
Benefit comparison tools
Would you happen to know where I can find tools to compare the benefits offered by our non profit organization to others nationwide who are similar to us?
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