Dishing About Salary and Benefits With Friends

If you want to see how your company stacks up, here's how the typical 401(k) works.

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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?