Tech employers are striving to make their benefits packages more competitive to enhance recruiting and retention efforts—especially their 401(k) plans.

It’s well-known that the tech industry faces a persistent talent shortage. As a result, tech employers have had to step up their benefits game, particularly when it comes to more widely available benefits like healthcare and retirement plan offerings. Sequoia Consulting Group’s 2021 Employee Experience Benchmarking Report (registration required) revealed that many tech companies are choosing to offer immediate eligibility and vesting, as well as increasing employer matching contributions to their retirement plans. 

Employers are making these enhancements despite the fact that retirement plan participation remained fairly steady—or, in the case of tech companies, even increased—during the pandemic. When it comes to recruiting and retaining top tech talent, competitiveness is key, and employers should consider what employees value most when evaluating and implementing retirement plan design.

The Match Matters

From that standpoint, employer 401(k) matching contributions matter. For example, if an employee is entertaining multiple job offers, all else being equal, the presence of a 401(k) matching contribution is often a deciding factor when choosing one employer over another, according to Sequoia. It’s no wonder the study found that employer matching contributions are on the rise. Although fewer than 45% of the employers surveyed said they currently offer employer matching contributions, that’s still up from 36% in 2018. 

In addition, 13% of the companies Sequoia surveyed said they planned to add or increase their 401(k) employer match in the next 12 months. What’s more, 52% of employers surveyed said they are considering adding a match or enhancing their existing match to boost plan participation.

Auto-Enrollment Improves Participation

Employers continue to rely on auto-enrollment as a go-to 401(k) plan feature to boost participation. Sequoia found that 56% of companies use auto-enrollment in their retirement plans. This is up markedly from five years ago, when just about a third (33%) of companies did so. The most common deferral rate for auto-enrollment is the industry standard 3%, however, 40% of respondents to the Sequoia survey said they use deferral rates of 5-6%. This is in line with industry trends, which show that employers are slowly increasing auto-enrollment deferral rates in an effort to help employees boost retirement savings.  

Eligibility and Vesting Enhance Plan Competitiveness

Tech companies are also more likely to offer immediate eligibility (64%) vs. non-tech companies, Sequoia found. Immediate eligibility means that employees can participate in the retirement plan on their date of hire instead of based on their age or time of service. More than half of the companies (61%) Sequoia surveyed offer immediate eligibility.

Immediate vesting, in which employees own their employers’ 401(k) contributions to their retirement accounts right away, is another strategy tech firms are using to bolster their recruiting efforts. This is a shift, as tech employers often relied on longer vesting schedules as a way to stem the tide of high turnover that’s historically challenged the industry. According to Sequoia’s findings, 72% of tech companies have put immediate vesting in place, compared to 67% of non-tech employers.

The Sequoia study included finance leaders from 807 companies, mostly in the tech space, located in tech hubs of California and New York. The survey was conducted between December 2020 and January 2021, with data collected in response to questions about health care benefits, employee wellbeing, talent programs and retirement programs.

The survey results clearly indicate that tech employers desire versatile, customizable 401(k) plan design features to help them increase their plan’s competitiveness so they can attract and retain the best talent.

WTIA 401(k) MEP Is Designed with Tech Employers’ Needs in Mind

The WTIA 401(k) Multiple Employer Plan (MEP) offers an array of plan design features and built-in flexibility to meet the unique needs of your company and employees as your business grows and evolves. Among its many benefits, the MEP allows adopting employers to make changes to their plan design anytime, at no additional cost. And the retirement plan is available to tech employers nationwide.

The MEP includes customizable plan design features such as automatic enrollment, safe harbor provisions, employer matching contributions, accredited investment funds, flexible vesting and eligibility schedules, Roth contributions, and more. For more information about the WTIA 401(k) MEP, visit https://401ktechcollective.org/ or send an email to 401k@washintontechnology.org.