January 22, 2002 (PLANSPONSOR.com) - Despite the
economic slump, the majority of companies have made no
changes to their sign-on bonus program, a survey
finds.
According to a late December 2001 survey by WorldatWork,
62% of the sample hasn’t changed their sign-on bonus
programs. They have not even made changes in the amounts of
a sign-on bonus.
The survey found that in all employee categories, with
the exception of clerical staff, more than 56% of
responding companies are still using a sign-on bonus
plan.
In fact:
over 85% have a sign on bonus plan at the executive
level
a slightly higher number give sign on bonuses to
upper management
three-quarters give them to middle management
over 80% offer them to professional staff
some 56% give them to sales staff
IT staff at 75% of companies are given such bonuses,
versus only 17% of clerical staff.
Generous
And companies are not skimping either. The survey found
that:
over a third of the companies report providing
between a $1,000 – $4,999 bonus
slightly less give between $5,000 – $9,999.
In the executive ranks:
only 8% provide more than $50,000
but 37% report providing between $25,000 –
$49,999.
The majority, 85% provide the bonus in the form of a
flat dollar amount.
According to the survey, only a third of companies
protect themselves paying a portion of the bonus on date of
hire and the remainder after a set period of time.
But, while at roughly 49% of the companies, employees
forfeit the bonus if they leave the company within the
first year, at 28% of the sample, employees get the cash
with no such strings attached.
EGTRRA To Foster Retirement Plan Reevaluation By
Employers
January 21, 2002 (PLANSPONSOR.com) - The Economic
Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA)
offers participants both new and expanded opportunities to
save for retirement, and employers appear to be gearing up to
help, according to a new survey.
Nearly half (42%) of employers responding to Hewitt’s
2001 Employer Reaction to EGTRRA Legislation survey say
that EGTRRA will precipitate a broader reevaluation of
their organization’s retirement plans within the next 18-36
months.
The survey, conducted last November and December, paints
a picture of noticeable change in plan administration
practices of the 160 employers who participated in the
email survey.
The survey found that 80% of employers say they will allow
employees age 50 and older to make “catch-up contributions”
to retirement plans, with 16% still considering adding the
feature. Plans will have to be amended to permit the new
contribution, which allow workers age 50 and older to set
aside funds for retirement above and beyond other plan and
regulatory limits – if the plan has been amended to provide
for the contributions, and if the participant is otherwise
eligible to make contributions under the plan (see IRS
Helps Sponsors “Catch Up”).
Nearly two-thirds (63%) of those who will allow the
contributions will do so in the first half of this year,
according to the survey, while another 31% plan to do so
before the end of 2002. Another 6% will allow the
contributions in 2003.
Most of those who plan to allow catch-ups (76%) will not
match that contribution, while 10% plan to do so, and 14%
are still considering the option. Unlike the catch-up
contribution itself, matching contributions are subject to
standard nondiscrimination tests.
Contribution Changes
Two-thirds (67%) of survey respondents plan to increase
contribution limits due to the increase in the defined
contribution annual limit to the lesser of $40,000 or 100%
of pay, with another 16% currently considering the
increase.
Perhaps tired of the expense and aggravation of testing,
36% of employers said they are considering the adoption of
an ADP “safe harbor” design in order to eliminate future
401(k) nondiscrimination testing.
A small minority (8%) plan to create additional
nonqualified deferral opportunities for employees who wish
to take advantage of declining federal tax rates in the
coming years, but another 26% are currently considering
creating such opportunities.
Hewitt notes that 28% of employers are considering
adding an automatic enrollment feature to their savings
plan in an attempt to increase participation rates.
Meanwhile, nearly half (42%) are contemplating other design
changes, including modifications to vesting requirements,
matching formulas, and profit sharing formulas.
Nearly half (46%) say they will revise rollover
procedures to accommodate employees who want to transfer
IRA and after-tax contributions into their defined
contribution plan, with another 17% considering revising
their rollover procedures.
ESOP Story
Roughly a quarter of responding employers are revising,
or are considering revising, their 401(k) plan to take
advantage of the new ESOP dividend deductibility
provisions. Employers may now take advantage of an
expanded dividend whether the employee has the dividend
reinvested or paid out as a cash distribution – if the
participant is given the choice to have the dividend paid
to them in cash, even if they decide to leave the funds
invested in the ESOP (see IRS Passes Along ESOP Dividend
Pass-Through Insights) .
The vast majority (88%) will set the default election
for dividend distributions to reinvestment in the plan,
with the remainder opting for a cash payment
default.
Among those considering revising all or part of their
401(k), more than half (60%) will convert all assets in the
company stock fund to an ESOP, while 23% of employers will
convert employer matching contributions to an ESOP.
While not addressed by the survey, those plans could come
under greater scrutiny in the wake of the Enron debacle.
Over half (53%) of employers will pay out dividends on a
quarterly basis, while nearly one-quarter (24%) of
employers will accumulate the dividends and pay them out
annually, according to Hewitt.
Nearly a third (29%) of employers say that ESOP dividend
payments will be effective for dividends paid in 2001,
while 21% indicated payments will be effective beginning in
2002, and another 18% indicated payments will be effective
some time after the first quarter of this year.
Tell All?
Most (86%) of employers will specifically communicate
EGTRRA provisions to employees as part of their efforts to
encourage retirement savings, with another 10% currently
considering their approach. Almost half (49%) of
employers plan to communicate the “saver’s tax credit” (for
lower-income workers) on savings plan contributions to
increase participation, with another 25% considering such a
move.
Over half of employers (52%) are not increasing their
financial education or advice efforts, but a third are
considering increasing those efforts, and 15% say they are
increasing efforts to provide more financial education or
advice.
Roughly one in five (19%) employers plan to help
employees save for college expenses through payroll
deduction or direct deposit into the newly expanded Section
529 tuition savings plans. Nearly half (46%) are
considering such a move, according to the survey.