McDonald's 401(k) Plan Is Supersized Compared To Many
Despite criticism for the low wages it pays its workers, McDonald’s (NYSE: MCD) offers generous retirement options in the form of the company’s 401(k) plan.
Workers who set aside one percent of their wages receive a 300 percent match from McDonald’s. The next four percent is matched 100 percent. In addition, over the past two years the company has made a discretionary profit-sharing contribution of two percent.
Lisa Emerson, McDonald’s vice president for global compensation said, “We wanted to encourage people to start saving early in their careers.”
With 401(k) plans now making up the bulk of most employee retirement funding, the percent of employer matching can make a huge difference, according to Bloomberg.
For example, Bloomberg said, a DuPont (NYSE: DD) employee making $31,000 annually at age 25, with three percent annual raises, making the average contribution to his or her 401(k) would likely have just shy of a million dollars by age 65.
According to Jack VanDerhei, research director at the Employee Benefit Research Institute, that same person, if they worked at Wynn Resorts (NASDAQ: WYNN), where the maximum match is $500, would end up with a little more than half that amount.
The Internal Revenue Service allows employees to contribute up to $17,500 of pretax income to their 401(k). Workers age 50 or older can contribute an additional $5,500. Employers can contribute an additional amount so long as the total does not exceed $52,000.
Related: Has McDonald's Become Irrelevant?
Companies are not obligated to contribute and can change their 401(k) plans at any time. Typically, corporations trying to attract highly-skilled or well-educated workers have the best retirement plans.
McDonald’s began offering its supersized 401(k) plan in 2004. In addition to the generous company matching scale, McDonald’s employees are immediately vested in their contributions and company matching amounts. Some corporations force employees to wait four years or more before they become vested.
USNews quoted McDonald’s human resource manager, Kenny Sanders as saying, “You can put away a nice nest egg for you and your family, depending on how long you stay at this company."
Meanwhile, USNews listed benchmarks of a good 401(k) plan. They include a generous employer match, immediate eligibility to participate, immediate vesting, inexpensive investing options, allowance for catch-up contributions, a Roth option and automatic enrollment.
At the time of this writing, Jim Probasco had no position in any mentioned securities.
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