Late last year, employees of International Paper Co. were victorious in their 7-year long battle with the company regarding 401(k) claims. International Paper Co. agreed to settle for $30 million, bringing relief to the 10 employees involved in the lawsuit. In the history of retirement plan disputes, International Paper Co.’s settlement is believed to be the second largest. Now, as 2014 is in full swing, CFOs are re-examining retirement plans for their employees.Where International Paper Co. Went Wrong
International Paper Co.’s $30 million settlement, though not an admission of fault, provides a few lessons for CFOs struggling with the retirement plan debate. When providing a 401(k) retirement plan – or any retirement option – CFOs need to ensure accurate reporting is completed, timely contributions are made, and that there is transparency regarding plan details.
- Accurate reporting. Reports indicate that one of the major complaints about International Paper Co.’s 401(k) management was reporting. Evidently, employees documented concern over the validity of reporting and the costs to do so.
- Timely contributions. A major factor in this lawsuit was the concern over timely contributions. According to details released about the suit, many employees reported delayed contributions which affected their plan’s ability to grow.
- Transparency. Another theme in the lawsuit was transparency. According to employees, information regarding the plan’s fees was difficult to find and confusing.
The Case for 401(k) Plans
With over $5 billion invested in 401(k) retirement plans, it remains one of the most widely used options by companies and employees. For CFOs, offering 401(k) plans provide a few benefits that enable companies to grow and retain employees long-term.
- Lower turnover. Offering sound retirement plans enable employees to feel secure in their future. For companies, this means lower turnover rates and the development of loyal team members.
- Competitive benefits. With companies vying for the most talented employees, providing a competitive benefits package helps companies attract top notch candidates.
- Increased morale. Employees respond positively to companies that help them invest in their personal futures. As a result, employees are more satisfied with their positions in a company.
In 2014, CFOs need to focus on increased 401(k) education and put an end to revenue-sharing in an effort to increase transparency and encourage employee contributions.
Does your company offer 401(k) retirement plans? Why or why not?