On May 13, 11:08 am, "joeNOS...@[EMAIL PROTECTED]
" <joe.weinst...@[EMAIL PROTECTED]
>
wrote:
> Thanks, I do understand the retention motivation etc, but I am asking
> whether a company match is in fact simple hard cash debited
> immediately
> from the cor****ate coffers, or whether there is any tax preference,
> interest-bearing
> deferment account, or other money-denominated compensation available
> to
> the company that lowers the actual cost to the company.
> Joe Weinstein
Well the minimum goal of most profit-seeking companies is to break
even. That is, they have at least enough net revenue to pay all
expenses (including salaries, capital improvements, etc...). Given
that, the underlying business rule is that for every $1 spent, the
company gets at least $1 back (net). As I think you understand,
employee retention is just an extension of this. By keeping employees
happy, productivity rises and HR costs fall. So economically, it
actually improves a company's "bottom line" to pay its employees
competitive rates. The real question is "which method of payment is
best (match or otherwise, in this case)."
Tax-wise: The match is a business expense by which the company reduces
its overall taxes. The company also avoids its share of FICA by
contributing to a qualified plan instead of direct pay. Furthermore,
HCE's can generally contribute more as the non-HCEs contribute more.
Therefore, the match is a motivator for the non-HCE to participate in
the 401k so that the big wigs can participate in the 401k which
reduces their personal income taxes.
Another unseen benefit is that the company match is often an illusion
of pay that some will never really receive. Employees look at company
match dollars as part of their pay, but don't consider that it could
be taken away from them in the future (vesting schedules). That isn't
the case with upfront wages.
As for the "interest bearing deferment..." the simple answer is "no".
A qualified plan is a trust entity that is setup and run independent
of the company. The company cannot use funds in the trust for their
benefit (that is a HUGE no-no). The only exception is that many
companies do not credit the company match until the end of the month,
so I suspect the match from the pay-periods in the middle of the month
were likely in a company owned sweep account until that time.
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