Wal-Mart Stores Inc, the largest US private employer, plans to end profit-sharing contributions next February, replacing them by matching some of the US dollars employees put in their 401(k) retirement plans to pare expenses.
The retailer will match contributions up to 6 percent of eligible employees’ pay, according to a memo obtained by Bloomberg News. Previously, Wal-Mart automatically put up to 4 percent of pay into the profit-sharing plan, according to spokesman David Tovar.
Since taking over last year, Wal-Mart chief executive Mike Duke has pledged to slow expense growth, aiming to counter five consecutive quarters of sales declines at US stores open at least a year. The switch by Wal-Mart, which has about 1.4 million US employees, will only benefit those who are in the plans, so staff will need to join to profit from the move, retirement consultant Byron Beebe said.
“It does require employees to participate,” said Beebe, the marketing head for the US retirement practice at benefits consultant Aon Hewitt in Cleveland. Beebe said 401(k) participation rates in the retail industry are lower than the average, which is about 75 percent.
Tovar wouldn’t disclose what percentage of Wal-Mart’s 1.1 million eligible employees currently contribute to the 401(k) plan, which is administered by Merrill Lynch & Co. Employees must wait a year before becoming eligible, he said.
Kalila Sams, 24, a customer-service manager at a Wal-Mart in Atlanta, said she would welcome a 401(k) match. Sams, who has worked at the retailer for about a year, said she earns US$10 an hour for 20 hours a week.
“Things are tight right now, but it would encourage me to save because you’re putting money away before you see it,” Sams said in an interview.
Some money saved from the switch will go toward quarterly bonuses for store employees, Tovar said. He said the move is part of a “comprehensive benefits package” that offers employees “the potential to receive more income today through our bonus incentive programs, and incentives to save and help them plan for retirement.”
Retirement plans such as the 401(k) allow workers to put money in tax-deferred accounts for retirement. Employer matches to workers’ contributions help employees increase savings and provide an incentive for them to contribute, said Nancy Hwa, a spokeswoman for the Washington-based Pension Rights Center.
Wal-Mart’s profit-sharing plan was created in 1971 by company co-founder Sam Walton, according to his biography, Made in America.
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