Is a December 401(k) match really a present?Blog added by Andy Stonehouse on December 12, 2012
Andy Stonehouse

Andy Stonehouse

Joined: October 13, 2011

By Andy Stonehouse

There's been a good amount of discussion in the last week over IBM's announcement to shift its 401(k) plan contributions to a once-a-year deal, rather than the more popular quarterly or even monthly inputs common to most plans.

The date picked, apparently, is Dec. 31, giving it a nice holiday theme - you know, sort of a present for all of its employees' hard work over the year - though it's not really a bonus. Actually, it's a financial deferral on the part of the world's one-time-biggest technology company, one that's going to save IBM a lot of money. Things are simple: If you leave before Dec. 15, unless you retire, you don't get the match.

This isn't necessarily a good guy/bad guy story, on the surface: IBM finished in the top 15 of the best overall 401(k) plans among major employers, and its employee benefit offerings are among the best in the country, with matches of up to 6 percent. And supporters say that by making it a once-a-year, all-or-nothing investment, it will in fact make employees more aware of the beneficence of their plan sponsor and the importance of making their own contributions.

But if you're like everyone else in the U.S., you’ve begun to notice that the holiday season also coincides with the financial year-end, and rather than filling us all with thoughts of peace and harmony and interdenominational feasting, there's also a not-entirely-insane reminder that Big Company Changes often happen just before New Year.

My own paranoia tends to be based on personal experience in what used to be called journalism.

I think I've been laid off or had long-term writing contracts end five times between Nov. 30 and Dec. 31 in the last two decades (clearly these were probably not the best of jobs, or employers, if that was the route they took). My ex-wife, working in another industry, got a very pleasant Dec 15 layoff one year. We did not particularly consider those great Christmases.

And as my editor has duly noted in his own column today, this long-term employee edginess - after four years, a little like living with a low-scale civil war called the Great Recession - will only further be aggravated by a one-two-three whallop of new taxes in the new year, as if we didn't have enough to worry about.

Back to IBM, for a second. Much of the concern about the company's moderately unconventional timing for its plan input (less than 10 percent of plan sponsors across the country do their deposit once a year) stems from those same feelings: Will employees make it through 364 days each year, or will they mysteriously find their services less than necessary before that date, meaning they won't get diddly-squat?

Employees note that the Dec. 31 lump-sum input also drastically strips the interest they might have made on investments over the course of the year.

The larger issue here is that IBM is one of those biggies and when the biggies start seeming more than a little nervous about their retirement benefits, people working for the not-so-biggies start to feel a little concerned. We've seen some pretty major companies drop their DB plans and substitute DC plans instead, this year; we're also well aware that many companies never returned to the 401(k) matches they offered three or four years ago.

Just another thing to think about as the holiday season continues to roll along.

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