Which is why I said option. Presumably the employee would negotiate it with the company. This doesn't have to be a full 35K or nothing deal, either. Both parties would benefit from any amount the employee would have already been paid going into a traditional retirement account rather than ordinary wages.
With the slight problem that $35,000 is more than median individual income. You'd get a negative paycheck.
It really doesn't make any sense that companies don't have that as an option, though. Unless my understanding is incomplete, the employer would get a tax deduction, and the money doesn't even hit the employee's AGI. Everyone is better off when an employee and the company shift compensation from regular wages to 401(k) contributions. Worst case, the employer is indifferent because they would have charged the employee's pay as payroll expense (and get a tax deduction anyways), and best case the expense gets reclassified and they don't have to pay FICA/payroll taxes on it. I could be mistaken, since I don't know the tax rules on retirement accounts from the employer side all that well, but it seems great to me.
Or add a decimal between the 1 and 5 for real shock factor
Posted by: Cromacster
« on: Today at 09:59:01 AM » Insert Quote
I didn't overhear it, but saw it posted as a quote on a coworkers cube.
With precise planning and a good 401(k), retirement is only 150 years away.
Wait till they're not around then, go in and cross out that extra "0".
Best 401(k) plan ever?
Employee contributes 10% of his salary and employer contributes 1800%!
I firmly believe employers should ditch the percentage match thing and just put in a flat $35,000 (lowering nominal salary accordingly).
I'm all for Mustachianism, but I'm not sure I could live on $2k per year. :P
First, you have the problem of then majority of employees perception of that compensation structure. Less take home, but more retirement contributions at company X? The majority of employees would prefer the opposite at company Y. So all companies would have to do this, all starting at once.
Then there's Jack's point. Again, the majority of employees cannot live off $salary minus $35K, simply because their salary is so low to begin with.
And then we have to consider the rules of retirement plans.To my knowledge, there are two kinds of contributions employers can make: matching and "profit sharing". Matching is moot. Profit sharing or discretionary contributions by the employer also usually follow some kind of formula. In my experience as a third-party administrator, that usually means the employer decides the total amount to be contributed then it is split amongst the employees based on the formula set forth in the plan document. This would be subject to non-discrimination testing as well, if my memory serves. So it would be difficult for each employee to negotiate with the employer. So people with a high rate of saving will STILL be unhappy with the arrangement, since it would have to pander to the high spending folks.
Might work if you were working for an ultra small firm, with an owner who was willing to spend additional time on this each year. Good luck finding that.