What You Can Learn From the Best 401(k) Plans of 2013http://www.fool.com/retirement/401k/2014/03/02/what-you-can-learn-from-the-best-401k-plans-of-201.aspx Nicole Seghetti
March 2, 2014
BrightScope, a provider of retirement plan ratings, recently announced its "Top 30 401(k) Plans of 2013." By learning about the characteristics of the best plans, we can determine what makes a great 401(k) and see how our plans stack up.
Here are some characteristics of the best 401(k) plans.
High employee participation
But employees aren't the only ones making retirement saving a priority. Companies with top plans are also encouraging their employees to save. For example, Google (NASDAQ: GOOG) raised its default automatic deferral percentage to 10% in 2013, up from 6% in 2012. The tech giant ranked No. 12 on BrightScope's Top 30 401(k) Plans of 2013, down one spot from last year.
According to BrightScope, Google's 401(k) plan, which has nearly 30,000 active participants and more than $2.4 billion in plan assets, is in the top 15% of plans for salary deferral, account balances, company generosity, and total plan cost. The average account balance is $86,000. Google likely offers its employees a top plan in order to retain the most desirable employees in a fast-moving, competitive sector.
Sizable employer contributions
Southwest's 401(k) plan, which has 42,000 participants with an average account balance of $82,000, ranks in the top 15% for account balances. Employer contributions were up more than 15% for Southwest's plan in 2012.
United Airlines' plan, which has the highest rating in its peer group, is in the top 15% of plans for account balances, company generosity, participation rate, salary deferral, and total plan cost. The average account balance is $460,000, and the plan boasts a self-directed brokerage account as well as 99 investment options (compared to the average of 24).
Many participants take full advantage of their employers' match, but not everyone does. Roughly three-quarters of all 401(k) participants contribute enough to maximize their employers' match -- after all, not contributing enough money to receive the full match is leaving free money on the table. A typical employer matches dollar-for-dollar up to 3% of salary.