With more and more college graduates of our generation joining the ranks of the service industry, there has never been a greater need for employers to offer 401k retirement plans. Some pioneering corporations have answered the call and are starting to deliver big profits.
Perhaps it would be helpful for those just entering the job market to explain exactly what 401k plans are. Having a 401k means that employees can choose to put a certain percentage of their wages into an account before income tax is applied and will not pay any taxes until they access the account after retirement. It’s essentially a tax break that helps people save money to support themselves when they eventually retire. Until now, it has been more closely associated with full-time careers, rather than part-time jobs and other jobs that don’t require a college degree. Another important aspect of the deal is that employers often agree to match a certain amount of what employees choose to save, which can double savings at best.
The company that first comes to mind when thinking of service industry employers with 401k plans is Starbucks. In their system, benefits are available to what they call “benefit-eligible partners” (ie, those who work more than 20 hours a week). Benefits include bonuses, health insurance, and discounted stock options. Your 401k options allow for a range of 25 to 125 percent matching of employee contributions up to 4 percent of total salary. That, combined with the free pound of coffee Starbucks employees are entitled to, probably makes some employees very happy.
Whole Foods, another forward-thinking corporation, not only has a reputation for paying its customers more than competing supermarkets, but it also offers more than 30 options for 401k retirement plans. The fund, which is established through Fidelity NetBenefits, has more than 4,500 participants and contains $379,087,293, according to Future Advisor. The average 401k balance for those who choose to participate is approximately $8,000.
For today’s workforce, it’s definitely a good thing that more employers are participating in retirement funds. However, things are not perfect. One employer, Darden Restaurant, which already has a reputation for its terrible 401k plan, made headlines by making changes to the retirement floor to make it even worse. The company owns several high-volume restaurant chains across the country, including Olive Garden, Long Horn Steakhouse and Red Lobster, so it’s perhaps not surprising that they provide less personal attention to their employees. Only about 13 percent of Darden employees participate in the unpopular program, and with stock prices falling, the options for investing retirement savings aren’t great.
For now, it seems the options range from great plans like Starbucks deals to not-so-sexy deals from Darden Restaurant. Only time will tell if the examples set by progressive employers will garner a majority following.