Could Employer Contributions Actually Lead to Leakage?
I recently stumbled across an academic study that claimed to find a correlation between higher employer contribution rates and leakage. I will confess to a certain skepticism at that finding. There are, after all, a well-established series of things that contribute to leakage, broadly defined as distribution of retirement savings prior to retirement – but employer matching contributions – and certainly more generous matching contributions – have never been on that list. The study – innocuously titled “ Cashing Out Retirement Savings at Job Separation ” – spends most of its 20-odd pages talking about leakage, its impacts on retirement security, and some possible solutions. That said, one needs read no further than the abstract of this paper to find its surprising conclusion regarding one such underlying cause; its authors “estimate that a 50% increase in employer/employee match rate increases leakage probability by 6.3% at job termination.” More specifically, “The ...