I know employers can match an employes contribution, lets say 50% with a max of 6% of salary. Where do employers get the money to pay this added amount? If they pay a guy 100k per year, where do they get the money to pay the added contribution? I always wondered about that.
1) It comes out of revenue. In the past, the money would have been paid into a pension fund instead of a 401K-type account. 2) Regarding the time required for the contributions to be vested, employers may attempt to "force out" employees who are due to receive the matching contributions. :eek:
Ok. So a pension is actually a profit sharing type of account after the total salary is paid? What about public employees? I guess when states( new york) match an employees salary, it doesn't come out of the states profit but returns on investment? Or does it come from taxes?
lets make it simple... an employee, to any company, costs around 150-200% of they salary they pay depending on the level of benefits... so PTO, Medical, Dental, Vision, Life, Pension, Stock Options, Retirement Plans, Restricted Stock Units, Social Security Match, Unemployment, bonuses, etc... all those are company expenses... so you can assume that $100K is more like lets say $200K to the company... and it all comes from GROSS REVENUES... it is all an expense... some smaller companies might have profit sharing, not all... even that profit sharing will be an expense, unless you are a partner, then that is a different story because then, you are getting a piece of the actual "profit"..