Hi all! Anyone know if there was a question about why employers encourage 401k contributions? I feel like I've read one before but I'm having trouble finding it.
HR just sent out a very doom-and-gloom email telling us to maximize our match and I'm curious why they are so concerned about our retirement plans.. but hey, maybe I'm just cynical :P
It has to do with the need to keep the plan from becoming "top heavy". The average employee needs to have a certain % deposited so the top guys can still hit their maximum.
@JoeTaxpayer what do you mean by "hit their maximum"? what does one employee's matching have to do with another except possibly reducing the amount of money available for the employer to put toward the match (by which measure, fewer employees getting a match would mean more funds available to those who do - the opposite of what i think you may be implying)
I don't have the details handy. You can google. The bottom line is that if the "highly compensated employees" all put in their $18K and got their match, but the average bottom half just put in a few thousand, the top would be refunded some money. It's in their best interest for the average employee to deposit some amount to the 401(k)