Another form of skimping occurs when companies delay 401(k) matches until the end of the year or early the following year. IBM shifted last year to a lump-sum payment. Workers who left the company before Dec. 15 didn’t get their match for the year.
“Younger workers who tend to be more mobile are really going to get hammered by this,” Harvard’s Madrian said of delayed matches and long vesting schedules. While the amounts left on the table may only total a few thousand dollars, over the course of decades of compounding and investing, they have the potential to significantly enhance retirement portfolios, Madrian said.
Financial Giants
Many large financial institutions also delay matches. Among these are Citigroup Inc., Goldman Sachs Group Inc. and Morgan Stanley. Citigroup and Goldman in e-mails said employees who leave during the year get the portion of the match owed. Morgan Stanley’s spokesman Matt Burkhard declined to comment.
JPMorgan Chase, the largest U.S. bank, began delaying matching contribution payouts in 2009. The company, which sells investments to retirement plans, urges savers to “Invest early and often,” in a J.P. Morgan Asset Management website.
The bank waited until January 2014 to match retirement deferrals its own workers’ made last year. The bank employed about 7,500 fewer people at the end of December than a year earlier, according to its fourth-quarter earnings filing. Employees who left the bank because their positions were eliminated got their matching contributions even if they weren’t employed on Dec. 31; JPMorgan declined to comment on the exact number, according to spokeswoman Jennifer Kim.
Meanwhile, the bank gave 6 percent of salary up to $600 to U.S. employees’ 401(k)s if they earned less than $60,000 a year. The award was made to employees with at least one year of service at the end of 2013. The program has been in place for at least two years and the bank hopes to continue it, Kim said.
“It’s ironic that the very financial companies that earn fees by sponsoring 401(k)s are themselves cutting back on contributions for their employees,” said Teresa Ghilarducci, an economist at the New School. “Even as they tell people to save more.”