There are many good reasons to participate in your company's 401(k) plan, including tax breaks, low-cost investment options, and to save and invest enough to support yourself in retirement. But perhaps the biggest motivator is an employer's 401(k) match.
The most common 401(k) employer matching contribution is 50 cents for each dollar the employee contributes, up to 6 percent of their pay. That means that the maximum possible match an employee can get using this formula is 3 percent of pay. While many companies have reduced or eliminated their 401(k) match over the past few years, some employers continue to offer significantly above-average 401(k) contributions. Here's a look at five companies currently providing generous employer 401(k) contributions:
1st United Services Credit Union. This Pleasanton, Calif.-based credit union provides $1.40 for each dollar an employee saves in the 401(k) plan, up to 5 percent of pay. "I can really impress our job candidates in interviews," says Melinda Ericks, vice president of human resources and development. Todd Hoyer, 42, a compliance officer who has been with the company for five years was intrigued. "It's the reason why I chose the credit union over the job offer that I had at another bank," Hoyer says. "[The match] is better than any other company I have worked at." The first dollar of the credit union's 401(k) match vests immediately, but employees must stay with the company for five years before the extra 40 cents per dollar is fully vested. Employees, who save an average of 6 percent of pay, also have free one-on-one access to a financial adviser. Only 11 of the credit union's 120 employees don't participate in its 401(k) plan.
Clif Bar. The 246 employees at organic food maker Clif Bar & Company receive a 100 percent employer 401(k) match, up to 5 percent of their pay. Nearly 90 percent of workers participate in the plan, saving an average of 8 percent of their pay. "People saving 8 percent of pay as an average is clearly higher than the norm," says David Wray, president of the Profit Sharing/401(k) Council of America. Employees can join the plan after just 90 days on the job and company contributions are immediately vested. "I was very diligent about trying to maximize the match because it's a great program," says Paul McKenzie, 55, who worked for Clif Bar for 13 years as director of creative services before leaving in 2007 to start his own business. "I do miss the benefits at Clif Bar, though." The northern California company recently added an Employee Stock Ownership Plan. "We have owners who wanted to create a workplace where they would want to work," says Claudia Perkins, Clif Bar's vice president of human resources.
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McDonald's. The company that invented extra-large fries and soda provides many of its employees with a supersized 401(k) match. McDonald's matches each dollar an employee contributes to the 401(k) plan with three dollars, up to the first 1 percent of pay. For employees age 21 and older who have been with the company for at least a year, the company also matches a dollar for each dollar saved on the next 4 percent of pay. Workers may also receive a discretionary profit sharing match, which was 3 percent last year. The frontloaded matching formula is designed to help employees without a lot of extra income to save to start building their nest egg. "That's a tremendous way to inspire employees at all income levels to participate," says Mellody Hobson, president of Ariel Investments, a Chicago investment firm. Salaried restaurant managers are automatically enrolled in the plan at 1 percent, unless they opt out or change their contribution level. Ninety-eight percent of these managers participate in the 401(k) plan. "This plan is for everyone in the company, from the CEO to the restaurant worker," says Ken Naatz, director of retirement plans at McDonald's. Naatz saved 5 percent of his pay in the 401(k) plan last year and received a 10 percent employer match, including the 7 percent maximum guaranteed match and the 3 percent discretionary match. "This is our only retirement plan. We want it to be really good," Naatz says. "It is designed to retain talented people at McDonald's."
NuStar Energy. The NuStar Thrift Plan matches employee 401(k) contributions dollar-for-dollar, up to 6 percent of pay. But the retirement benefits go far beyond that. The company also provides a traditional pension. "We want our employees to feel like if they come to work every day and do a good job, their financial future will be taken care of," says chief executive Curt Anastasio. "It allows them to really focus on their work." Human resources consulting firm Hewitt Associates found that an employee with 30 years of service earning $100,000 is likely to be able to replace 117 percent of his or her working income upon retirement at age 65 if he or she saves 6 percent of pay in the 401(k), gets the full 401(k) match, and claims Social Security at age 67. Mike Burgett, 54, a senior vice president of strategic sourcing at the company who plans to retire within 10 years, says he isn't worried about financial security in retirement. "There is a lot of security and comfort in the notion that we have a defined benefit plan," Burgett says. He also saves enough in the 401(k) plan to get the full 6 percent match. "I can focus on what I need to do every day. I'm not distracted by the future," he says. "Retirees here are prepared to leave."
Red River Credit Union. This credit union in Texarkana, Texas, doesn't need to automatically enroll workers to get them to participate in the 401(k) plan. Every current employee over age 21 voluntarily signed up once they heard about the generous match coupled with the usual tax benefits of 401(k) participation. "They are educating employees about how important it is to set aside money for retirement," says Deborah Hall-Pope, chief human resources and organizational services officer for ASCD, an education nonprofit, of Red River Credit Union. "It's noteworthy to help people see the value of what could happen in the future when they are struggling with the here and now." Red River Credit Union matches employee retirement contributions dollar-for-dollar, up to 5 percent of pay, then contributes 50 cents for each dollar saved on the next 5 percent of pay. Employees who save 10 percent of their pay in the 401(k) plan can get a match equal to 7.5 percent of their salary. On top of that, there is an additional discretionary profit-sharing match, which averages 3 percent annually. "When people hear about the 401(k), their ears perk up," says Karen Rhodes, the human resources director at Red River Credit Union. "We encourage them to be greedy when it comes to the 401(k)."