Company provided 401(k) plans are a fantastic perk, but not all are created equal. Peggy Collins of Bloomberg News spent six months researching company filings and has come up with a list of the best, and worst, company 401(k) plans. In the above Investing 101 episode, we talk to Collins about what impacts the quality of a company's 401(k), and which companies offer the best and worst plans.
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Collins told us when it comes to evaluating a plan, they looked at "what levers a company can pull to give people the best or worst shot at saving enough for retirement." These levers include the match rate, any additional contributions from employers -- some companies give you money whether you put in money or not. They also looked at factors like vesting, or how long you have to stay at a company until you can get the matching contribution, and the availability of index funds.
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Topping the list: Oil and natural gas producer ConocoPhillips (COP) and tobacco company Philip Morris (PM). Collins tells us ConocoPhillips has a generous match, where an employee can put in one percent and Conoco will match you nine times that. "They're helping people young in their careers get a huge jumpstart, and then have 40 years potentially to see that money grow and compound," says Collins.
Bloomberg reports: ConocoPhillips estimates that an employee could retire at 60 after 35 years of service with savings of $3.8 million, adjusted for inflation, assuming a starting salary of $75,000 and increases of 4 percent a year.
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Philip Morris offers a generous additional contribution -- they add 15% of employee compensation at the end of the year no matter what employees saved in their accounts.
Some of the names near the bottom of the list may be surprising. Social media company Facebook (FB) came in dead last, while Amazon (AMZN) and Whole Foods Market (WFM) were near the bottom of the 250 largest companies by market capitalization that Bloomberg ranked.
Collins explains that Facebook had no match for the year that they rated the 401(k) plan, which is why it ranked at the bottom, but now Facebook is matching 3.5% of salaries if an employee puts in 7%.
Amazon, she says, does a similar thing where it matches a fraction of your contribution and makes an employee wait three years to vest.
Whole Foods told Bloomberg it had to look at the whole compensation package, saying while it matches a maximum of $152 dollars annually, Whole Foods has very good health benefits for part- and full-time workers.
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