As far as 401(k) employer matches go, Abbott Laboratories' is pretty hard to beat. Employees at Abbott contributing 2% to their retirement accounts receive a startling 5% match.
"That's a 250% return on your 2% contribution," said Diego Martinez, Abbott's Chicago-based divisional vice president of benefits and wellness.
Energy services company AVANGRID Inc. also offers employees a "rich" 401(k) matching contribution. The company matches $1.50 per $1 that employees put into their accounts, up to 8%.
That means that if a participant contributes 8%, he or she will receive a 12% match. Union employees receive slightly lower matches that are either 150% on 6% or 150% on 7%, which are "still very, very rich formulas," said Paul Visconti, the company's Orange, Conn.-based senior director of total health and retirement programs.
AVANGRID implemented the generous matches to differentiate the company and its $2 billion 401(k) plan and "get people in the door and have them stay throughout the course of their career," Mr. Visconti said.
Matching employee contributions more than dollar for dollar — as Abbott and AVANGRID are doing — is generous and highly unusual.
Most employers match either dollar for dollar (49.8%) or 50 cents per dollar (31.2%), with the most common matching formula being 50 cents per dollar on the first 6% that employees put in (21.3%), according to the Plan Sponsor Council of America's latest annual survey of profit-sharing and 401(k) plans.
Only 2.8% of employers match more than dollar for dollar, the PSCA survey found.
The relatively few employers that match more than dollar for dollar do so to attract and retain employees and in some cases to compensate for shutting down their defined benefit pension plans, according to industry consultants. Other companies, worried about the prospect of workers not being able to retire, want to help their workers build their retirement savings faster, consultants said.
For Abbott, making the $15.4 billion 401(k) plan accessible to employees through a low 2% employee deferral rate "entry point" was a key factor in designing the match formula in 2001.
"We want to encourage people to save for retirement," Abbott's Mr. Martinez said, noting that a 2% deferral rate is manageable for most employees. "Once you get people starting to save, then everything becomes easier."
Mr. Martinez believes that the generous match has made a difference in the company's recruiting efforts. Workers who have other financial needs and can't contribute the 6% or more that other companies may require to get the maximum match may find a good "value proposition" in Abbott.
"The fact that we have this very low entry point, I think it makes a difference," Mr. Martinez said.