When it comes to 401(k) vesting policies, Greenheck Fan Corp. is as liberal as it gets. The manufacturer relaxed its vesting policies to make all of its employees — union and non-union alike — immediately vested in the company's 401(k) contributions, a move that companies are generally reluctant to make.
"From a manufacturing perspective, we felt like this could give us a little bit of an advantage in our benefit package as we're going out to recruit other employees," said Brian D. Hoover, Greenheck's human resources manager for architectural products in Schofield, Wis.
The company started shifting its employees from its six-year graded vesting schedule at the end of 2013, a process that concluded in 2015 with all employees being fully vested in company 401(k) contributions.
"I think that more manufacturers are starting to go to the 100% vesting now, but I think we wanted to get out in front of that curve and be a leader in that regard," Mr. Hoover said.
Greenheck, whose 401(k) plan has 4,300 participants and $365 million in assets, is unlike most plan sponsors. Fewer than 2 in 5 employers (38.5%) offer employees immediate vesting in 401(k) matching contributions, a number that has been stubbornly flat for the past decade, according to the Plan Sponsor Council of America's 61st annual survey of profit-sharing and 401(k) plans. Among companies comparable in size to Greenheck — those with 1,000 to 4,999 employees — the percentage is even lower, with only 30% immediately vesting their employees.
Plan sponsors often choose to implement graded vesting schedules that gradually increase to 100% over a specified period of time — typically three to six years — to reduce both plan costs and employee turnover, according to a study conducted by the Government Accountability Office in October 2016. When employees leave before being fully vested in employer contributions, they forfeit the unvested funds, which sponsors can then use to offset plan costs. Many employers also view long-term vesting as a way to retain employees.
While experts agree that vesting schedules reduce costs, they question whether they indeed lower turnover, saying today's increasingly mobile workers will jump to new jobs for better-paying positions regardless of the money they leave behind in unvested company contributions.
In the bigger scheme of things, employers may also be doing employees a disservice given today's mobile workforce, according to policy experts. Vesting schedules are not likely to alter workplace trends but will hurt the retirement savings of workers who switch jobs over their careers, they say.