As more and more college graduates of our generation join the service industry, the demand for employers to provide 401k retirement plans has never been stronger. Some pioneer companies have already answered the call and started to provide huge benefits.
Perhaps for those who have just entered the job market, it would be helpful to explain exactly what a 401k plan is. Owning a 401k means that employees can choose to deposit a certain percentage of their salary into an account before income tax is applied, and will not pay any taxes until they access the account after retirement. In essence, this is a tax cut that can help people save money to support their families when they eventually retire. So far, it has the closest relationship with professional full-time occupations, rather than part-time and other jobs that do not require a college degree. Another important aspect of this arrangement is that employers usually agree to match a certain amount of funds that employees choose to save, which in the best case can double savings.
Starbucks is the first company that comes to mind when considering service industry employers for 401k plans. In their system, so-called “eligible beneficiary partners” (that is, people who work more than 20 hours a week) receive benefits. Benefits include bonuses, health insurance and discounted stock purchase options. Their 401k option allows 25% to 125% of employee contributions to match, up to 4% of total salary. This, combined with the one pound of free coffee that Starbucks employees are entitled to, may benefit some very happy employees.
Whole Foods is another visionary company that not only pays more to customers than competing grocers, but also offers more than 30 options for 401k retirement plans. According to Fidelity Advisors (Future Advisor), the fund was established through Fidelity NetBenefits, with more than 4,500 participants, including US$379,087,293. The average 401k balance of those who choose to participate is approximately $8,000.
For today’s workforce, it is undoubtedly a good thing that more employers participate in retirement funds. However, things are not perfect. An employer, Darden Restaurant, is known for its poor 401k plan, and he made headlines by changing the situation in the retirement factory, making them worse. The company has a number of large restaurant chains across the country, including Olive Garden, Long Horn Steakhouse and Red Lobster, so it’s no surprise that they provide less services to employees than personal care. Among Darden employees, only about 13% participated in this unpopular plan, and as the stock price fell, the choice of investing in retirement savings was not ideal.
For now, there seems to be a lot of options, from the grand plan offered by Starbucks to the less attractive products offered by Darden Restaurant. Only time will tell whether the example set by progressive employers can get the attention of most people.