High profit-sharing payouts boost airline retirement benefitsNews added by Benefits Pro on February 12, 2016

Benefits Pro

Joined: September 07, 2011

My Company

By Marlene Y. Satter

Are airlines using generous profit-sharing payouts to compete for industry talent?

One might think that from some of the recent awards in the industry, as Southwest, Delta and even United reported record profit-sharing contributions of $620 million, a whopping $1.5 billion and $698 million, respectively, for the year.

Those contributions come out to significantly higher percentages of employee pay than those surveyed in the Plan Sponsor Council of America’s 58th annual survey.

Among respondents to the survey whose plans either included or were solely a profit-sharing plan, the average employer contribution was 5.5 percent.

Southwest’s contribution, on the other hand, came out to approximately “15.6 percent of each eligible employee’s eligible compensation, or the equivalent of eight weeks’ pay.”

Record-setting profit-sharing contributions can certainly be an attraction, particularly when compared with sponsor contributions to 401(k) plans.

The PSCA survey found that average employer contributions for businesses in general, not just airlines, in 2014 — the year for which the most recent survey was conducted — were only 3.2 percent. And that was up from 2013’s average of 2.9 percent.

As retirement ranks increasingly higher on an aging workforce’s financial worry list, the desirability of profit sharing as an employee benefit can certainly rise in the ranks accordingly, if such mega rewards appear to be in store.

But according to Deloitte’s 2015 Annual Defined Contribution Benchmarking Survey, just 31 percent of plan sponsors make profit-sharing contributions in their DC plans.

And even the majority of those firms who make such contributions don’t have to.

The survey found that 62 percent of respondent firms have a discretionary structure, with 51 percent making profit-sharing contributions and 11 percent not making them among 2015 respondents; 36 percent of plans have a fixed structure.

In addition, 72 percent of profit-sharing contributions are allocated pro rata based on compensation, and vesting schedules are applied for profit-sharing contributions by 72 percent of plans, with immediate full vesting provided in just 28 percent of plans.

Originally posted on BenefitsPro.com
The views expressed here are those of the author and not necessarily those of ProducersWEB.
Reprinting or reposting this article without prior consent of Producersweb.com is strictly prohibited.
If you have questions, please visit our terms and conditions
Post Press Release