joeNOSPAM@[EMAIL PROTECTED]
wrote:
> Hi all. We know that we should do all we can
> to get as much as we can of a company
> matching contribution to a 401k. Can anyone
> describe the benefit to, or discount to the
> company for it's contribution? I am quite sure
> a company bottom-line isn't lowered dollar-for-dollar.
> I know of billion-dollar companies with differing
> matching amounts and programs, and I wonder
> why.
It's just another form of employee compensation, I don't see why the
company wouldn't deduct it as a business expense. Why are you "quite
sure" otherwise? As to why companies don't all offer exactly the same
match, it's just part of their overall competitive strategy in the labor
market. Matching might also be a factor in meeting the rules for
highly-compensated employees (HCE's) vs. rank-and-file when it comes to
taxation of qualified retirement plans, but I'd have to research that to
be sure.
The main benefit to the company of 401k-match vs. straight pay is, it
removes some compensation from "base pay". So many things are tied to
base pay -- group term life insurance, unemployment, severance, pension,
vacation/sick pay, bonuses -- that anything the company can do to move
dollars out of base pay in favor of "supplemental" compensation such as
401k matching or group health insurance is a plus for the company and a
minus for the employee.
It's just another form of bundling. Almost anytime something is
bundled, it's usually better for the seller and worse for the consumer
(because it makes it harder for the consumer to comparison-shop).
-Mark Bole
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