Thursday, February 06, 2014

AOL is leading the way to make 401(k)s worse for everyone

AOL is leading the way to make 401(k)s worse for everyone

"So when IBM changed its 401(k) system in 2012 to hand out employee matches in one lump sum at the end of the year, there was an uproar. Those who left the company before Dec. 15 would not see any matched dollars unless they were retiring. And employees would also miss out on all the compounding throughout the year from the contributions."

AOL's change: "In order to receive the company match, the employee must be "active" on Dec. 31, 2014. In addition, the contribution will be allocated as a "one time lump sum after the end of the Plan Year." In other words, employees will have to stay through the end of the year to get the match, and then the contribution won't even come during 2014. In a year like last year, where the stock market was roaring, the difference for an employee who left in December could amount to thousands of dollars in pay and added savings."

They point out, this will hurt employee mobility.

I have to say, when I was working I never made decisions like this. I never thought about will this shave fractions of a percent off something, rather I asked, "is this the right thing to do". In an environment where you're constantly being asked to do more with less maybe this approach is right, but it still feels wrong. Companies should be figuring out ways to get more money from customers, and figure out ways to get more money to employees, not less.

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