EMPLOYER CONTRIBUTION: 100% match on 8%, plus profit sharing

Imagine a retirement plan where the plan sponsor matches 100% of each participant’s 8% contribution—and provides profit sharing. David Weekley Homes, a residential construction company, is that generous.

It may be no wonder, then, that the plan’s recordkeeper, Milliman, has found that 72% of the architectural and construction firm’s employees are on track to successfully replace 80% of their income or more.

The plan automatically enrolls workers at a 4% deferral rate and escalates their contributions each year, up to an 8% threshold, so they can enjoy the full match. An early adopter of automatic provisions, the firm has had automatic enrollment in place since 2004 and automatic escalation since 2011.

The plan currently has a 95% participation rate and average deferral rate of 7.3%.

As to why the company decided to offer an 8% match, David Weekley, chairman of the eponymous company, says that number had been 6% for a decade, but then, in 2011, the company “did a study to figure out what percentage of our employees were retirement ready. It was apparent that a large number of people weren’t.”

The company then did some additional research and found that an 8% match could, ostensibly, get a large majority of its employees retirement ready by age 65, Weekley says. This is why, starting in 2012, the company began offering an 8% match, he says.

In order for employees to receive profit sharing, the company must earn net profits of at least 5%, Weekley says. In highly profitable years, employees have received bonuses as much as 18% of their salaries, he observes. “We treat them as if they were stockholders. They benefit in the same way the company shareholders do.”

The chairman notes that his company has been selected by Fortune magazine 10 times as one of the Top 100 Best Companies to Work For. As that coveted recognition is largely based on employees’ attitudes toward their employer, “it is illustrative that they do appreciate what we do for them,” he says.

While the participation rate of nearly 95% and automatic deferral rate of 4% are on the high side for a retirement plan, the company regularly considers how to bring those figures even higher, Weekley says.

In the near future, for instance, the company might automatically enroll people at a deferral rate above 4% paired with an escalation higher than 1%. “We try to balance at what rate people can start off and stay in the plan, and how much more of a benefit would it be if it took them fewer years to reach the 8% threshold,” he says. —Lee Barney

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