Are lump sum matches all bad? When AOL decided to switch to lump sum payments due to higher health care costs, they relented after a public uproar — even though other plan sponsors like IBM had already made the same move. Massachusetts’ chief securities regulator also weighed in, concerned that participants are being shortchanged by the practice and vowing to to determine how many people have been affected.
The concern, of course, is that participants lose gains throughout the year and have to stay until after the end of the year to receive the match.
But is no match better than lump sum? The question is raised in an article in Workforce.com. Though few companies use them (only 8% of Towers Watson’s clients), lump sum match payments become more popular when budgets are tight or the economy slows down. And what about companies that don’t currently have a match? Are lump sum payments a way to ease into matches? The most common match formula is 50% of 6%, Towers Watson says.
Do any of your clients use lump sum matches? Under what circumstances would you recommend it?
