A handful of large U.S. corporations announced they are raising the employer match for their 401(k) retirement plans or are making other changes in their benefit plans in the first month after a tax reform law was signed by President Trump. And nearly half of companies surveyed said they are considering taking such an action this year or next.
As of early February, Cigna, Visa, Honeywell, Aflac, AutoNation, Nationwide Insurance, SunTrust Banks, Peoples Bank & Trust, and Western Alliance Bancorp were among about 25 companies that said they would either increase their match for participants’ 401(k) deferred contributions or would make one-time contributions to these accounts, according to a list compiled by politically conservative U.S. taxpayer advocacy group Americans for Tax Reform.
But even more employers were weighing the decision to do something similar, said a survey by global benefits consulting firm Willis Towers Watson that was released January 25. Of 333 large and midsize employers polled, 49% said they were mulling making a benefits change as a result of the new tax law, which reduced many companies’ tax rate to 21% from 35% in an attempt to stimulate the economy.
Looking at 401(k) Contributions
Twenty-six percent of companies surveyed said they have, are planning to, or are considering boosting 401(k) contributions, compared with 34% doing the same with expanded personal financial planning services for workers. Nineteen percent responded that they are thinking about accelerating defined benefit pension plan contributions (see, DB Sponsors: Consider Accelerating Contributions For 2017 Plan Year Amid Tax Reform).
Other initiatives being considered as a result of the tax changes included increasing the employer’s healthcare subsidy, reducing or holding flat the employee payroll deduction for this coverage, evaluating executive pay programs, or introducing a profit-sharing or one-time bonus payout to all employees.
“[I]mprovement in the company’s 401(k) match seems like a more substantive change than the far more popular option of paying $1,000 bonuses,” wrote Prof. Alicia H. Munnell, director of the Center for Retirement Research at Boston College, in a January 17 blog post for the financial news site MarketWatch. “It is more likely to be permanent and also recognizes that 401(k) contribution rates are woefully low.”
Willis Towers Watson cautioned employers to “communicate and address employee questions” about their actions taken,—or not—in response to the tax law changes launched at the start of 2018.
|Jane Meacham is the editor of BLR’s retirement plan compliance publications. She has nearly 30 years’ experience as a writer/editor of financial services news.|