Industry News

DC PLANS: Connecting Employees to the Bottom Line

In the November 2010 issue of IOMA's Managing 401(k) Plans, an article reports on a survey conducted by the Profit Sharing/401(k) Council of America (PSCA). David Wray, President of the PSCA presented the results of the study entitled Shared Capitalism at Work at the PSCA's Annual Conference in September at Amelia Island, FL. Wray reported that profit sharing produces the following results: Shirking is reduced, Firm performance is improved, worker well-being is enhanced, workers feel more comfortable being part of decision making, there is a greater sense of job security, workers have a greater satisfaction with their influence in the workplace, and workers have a greater sense of trust in the firm and its management. PSCA is now seeing a "customization" of company contributions. Companies are making contributions to nonparticipants in 401(k), and 401(k) matches plus nonelective profit sharing contributions. Wray cited one company where the amount of the match is scaled by the years of service of each individual employee. For example, employees with 5 years service get 25 cents on the first 8% of pay, those with 5-10 years of service get 50 cents and those with 10 to 15 get 75 cents and those with over 15 years of service get $1 for each $1 of contributions up to 8% of pay. Wray suggested adding a lifetime total of contributions to the quarterly statements to remind employees of the cumulative total of the company's commitment to the plan. He also suggested that employers stay connected with the participants after retirement. 83% of employers surveyed said that they felt there was a role for employers in making plan annuities available to retirees. Wray concluded by observing that aging Baby Boomers and Millennials are two barbells that need to be managed. The Baby Boomers are moving into retirement but may still want to work, partly because they may not have as much money as they'd like and the Millennials who are entering the work force with a lot of debt, both student loans and other debt, and are concerned with the here and now as a result.

(Source: Managing 401(k) plans & PSCA)

Updated 8/17/11