IBM Announces New Plan For Employees’ 401k Payment reports Tenet Financial Group
The company has joined the minority of companies that contribute to employee 401k’s annually
Like nearly 90% of large companies, IBM was known for matching employee contributions to their 401k accounts on a bi-weekly (every paycheck) basis, but has now announced that it will only match contributions once a year, which could affect many aspects of the job.
First off, the change should discourage employees from leaving the company mid-year in fear of losing money, and could also hurt investment opportunities if the market starts to improve. According to IBM, long term employees should not be affected at all because with the ups and downs of the market over time, the difference in compensation should be minimal.
It is likely that many other big companies will follow in the footsteps of IBM, who is known for its exceptional benefit packages and plans:
“IBM is one of the world’s most influential plan sponsors,” said Mike Alfred, CEO of BrightScope Inc, “Everyone in the benefits industry will pay close attention to whatever IBM does.”
IBM employees match up to 6% of employee contributions for those who have been with the company since before 2005, and up to 5% for everyone else. The company also contributes up to 4% of pay, even if the employee does not contribute to their own 401k account. The new plan will put IBM in the minority of companies who match contributions annually (7%) and take them out of the 88% that contribute each payment period.
The underlying idea is that the company will make money because it will not match contributions for those employees that leave during the year, before December 15th (the new payment date) and while it may hurt people in the short term, the benefit for the company outweighs such loss. The only way that the new plan benefits the employees in the short term is if the market declines because investments can no longer be made so frequently.
Overall, the new plan is a big move for such a big company. While the intentions are good the company itself, the effects on the employees seem to be negative as a whole. The new plan is not expected to drive employees away, but could hurt hiring in the future if rival recruiters use it as a negative publicity tool.
About Tenet Financial Group:
Tenet Financial Group (http://tenetfinancialgroup.com/plandesign.html) helps people and their business design a self-directed 401k plan. Offering plan installation and administration, Tenet Financial will help organize and execute the right 401k plan for anyone.
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