Fair allocation formula

[Guest latwz]

Hi,

We are trying to phase out our DB plan and put in a new 401(k) plan. We are divided on how to structure the allocation forumla. Since there are so many long term employee here, some of the committee members want service to be the only variable in deciding allocations and they want to increase allocations as service increasses. (Funny, they will all benefit from this formula). I, however, disagree with that rational. I have been with the organization not quite a year and have brought with me over 25 years of experience and education to the position. I feel that the committee needs to find a blend between long service and age to take into account the more recent seasoned hires. For example, I would need to work here until close to retirement to take advantage of the increased contribution. What seasoned employee would be OK with that situation? Trust me, this has occured since my hire. But at least I am on the committee and get a say.

I want to propose giving 1 point for each year of service and 1 point for each birthday. Then stager the allocation by points. Those under 45 points get 2%, 55 points get 4%, etc... I am not sure they will buy it.

Can anyone think of any creative yet simple formula out there that would accomplish a more fair allocation?

[Guest BXO]

Everyone gets the same contribution? That's pretty equal to everyone.

Based on pay? Presumably your seasoning landed you a position with greater pay than someone right out of school.

[Guest latwz]

I spent most of my career in the same position because of benefits. I had no choice but to branch out and do something different. Therefore, I am paid OK, but not like if I had focused on upward mobitilty, however they are reaping the benefit of my experience and education.

In any event, the allocation forumla suggested was based on age and service point with 2 point for each YoS. You need to get to 65 pts before contributions increase. Therefore, If you hire someone who is age 55, they would have to work until close to retirement to get in on a larger cont. I think they need to focus on a allocation formula that will attract and retain new employees as well as the existing long tern employee.

Unfortunatly, I am beginning to think that I (and the others like me) am not a valued addition! Necessary but not valued.