Tax reform prompts Visa to raise 401(k) match for employees
- Visa said it is raising its match on employees' 401(k) contributions, in response to tax reform.
- The company said it will increase its contribution to 10 percent of base salary.
Global payment network company Visa said Monday it will strengthen contributions to employees' 401(k) savings plans, as a result of the recently passed Republican tax law.
"Tax reform in the United States will strengthen Visa's competitive position globally and create new opportunities for Visa to invest in our business," the company said in a statement. "With the additional 401(k) match, Visa's U.S. employees will enjoy a sustained benefit, consistent with the role they will play in building our business."
The company said it will increase its 401(k) contribution to 10 percent of base salary. In other words, an employee who earns $100,000 a year can set aside $5,000 and the company will contribute $10,000. Visa's longstanding policy has been to contribute $2 for every $1 an employee contributes. Employees can now contribute up to 5 percent of base pay, up from 3 percent.
Visa is just the latest in a host of companies, including Boeing, AT&T, Fifth Third Bancorp and Wells Fargo, to share proceeds from the GOP corporate tax cut with employees.
In all, there was $5.3 trillion in 401(k) plans as of Sept. 30, 2017, according to the Investment Company Institute. The median balance in a 401(k) account was $24,713, according to Vanguard.
Unlike bonuses, which employees could either save up or blow on shopping, an increase to a retirement plan match is useful for workers' long-term financial planning, said Gregg Levinson, senior retirement consultant at Willis Towers Watson.
Whether more employers will boost their 401(k) match in response to the tax law remains to be seen.
"The downside is that if the economy or the tax rules change, they've made a promise to employees that is going to be hard to scale back," said Levinson.
Smaller firms, which have fewer resources, may raise wages or give a one-time bonus, as opposed to raising their 401(k) plan matches.
"It's a one-time benefit," Levinson said. "You get the good will, but you're not on the hook."
— CNBC's Darla Mercado contributed to this report.
(Correction. An earlier version had an incorrect amount for the company contribution.)
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