401(k) Matching Contributions are Getting Better, Corporate Finance Execs Say
401(k) matching contributions are on the rise, thanks to a tight labor market and changes in the corporate tax rules. According to a new survey of 217 chief financial officers and finance executives from Prudential and CFO Research, cited in BenefitsPro, over half of corporate finance executives surveyed — 57% — said they expect 401k matching contributions to increase. Wage increases are also on the table: two-thirds of the executives Prudential and CFO Research polled said they expected to increase employees’ pay.
The Tax Cuts and Jobs Act, passed in December 2017, resulted in a reduction of corporate tax rates from 35% to 21%, which has enabled many companies to build a sizable cash reserve. As such, nearly 500 companies had announced bonuses or pay increases by early April, a move that impacted more than 5.5 million workers, according to the White House’s Council of Economic Advisors, cited by BenefitsPro.
Other companies announced hikes in their employer matching contributions. For example, Cigna implemented a permanent 1% increase in its company match. Cigna has 30,000 employees and is the fifth largest health insurance payer in the U.S. by revenue, covering 15 million subscribers.
The Prudential/CFO Research survey also found that financial executives are optimistic about the increase in wages and benefits. Eight in 10 said they expect these enhancements to improve financial wellness, boost employee productivity and positively impact companies’ bottom lines. A nice complement to increasing 401k matching contributions.
That said, the aggregate impact on financial wellness will not immediately be measurable, according to BenefitsPro. It will take time for these changes to reach measurable levels and to understand their true impact on employees.
For now, corporate financial executives appear to be optimistic about their firms’ ability to reward employees by paying them bonuses, increasing wages, and raising 401(k) plan matching contributions. Whether the benefits will be long-lasting or last only as long as the economy continues to grow remains to be seen. For now, better pay and increases to 401k matching contributions have become welcome news for both employers and employees.
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