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Tesla skips 401(k) match for third straight year
- jsight 6y agoDespite the offer of stock based compensation for employees, I still think this is a bad idea. The 401k is one of the most effective ways to encourage long-term savings among employees. Its an important benefit with significant tax advantages.
- nemo44x 6y agoCan't you take your shares and deposit them in your 401K (pre-tax) and then sell them within it (not taxed) and exchange for a fund or w/e you're interested in diversifying with?
- bri3d 6y agoI have never, ever heard of the ability to vest RSUs into a 401k (or even an IRA, which would at least make a little bit more sense), has anyone else?
- toomuchtodo 6y agoA company can match 401k contributions with company stock. If you were receiving a rapidly appreciating stock as part of your compensation package, it would make sense to want to have the option (but not the obligation) to receive your Tesla stock in your 401k to shield it from income taxes in the short term. https://www.federalreserve.gov/pubs/feds/2004/200423/200423pap.pdf https://www.federalreserve.gov/pubs/feds/2004/200423/200423p... http://www.pensionrights.org/issues/legislation/company-stock-investments-401k-plans http://www.pensionrights.org/issues/legislation/company-stoc...
- lvh 6y agoIf it was rapidly appreciating surely you'd _want_ the immediate income tax hit and move it to a Roth 401(k)?
- toomuchtodo 6y agoReally depends on your current income, projected retirement income, current and future tax brackets, if your 401k supports Roth contributions and in service conversions, etc. To your point, the goal is to optimize for capital appreciation and minimizing tax drag on that capital for its investment duration.
- lvh 6y agoSurely we can agree that for the specific case we're discussing: TSLA TTM, you would prefer the Roth version of that at every income level if it was available.
- toomuchtodo 6y agoI agree.
- bluejekyll 6y ago401k’s generally have a limited number of funds available to trade. I think the reasoning is to protect the employee from poor investments. I’ve never seen one that allows you to trade on individual stocks, only funds.
- lvh 6y agoGenerally, yes, but the thing you're looking for is called "self-directed" and is supported by most major providers. The nicest one if you really want to do this is probably Schwab. The problem with GP's scheme isn't that there's a good reason you can't hold whatever security you want in your retirement account: it's that you can't make the contribution in-kind from a taxable brokerage to your tax-advantaged 401(k)/IRA. It's true that that's rare: but that's because your employer is giving you a shitty 401(k). Ask me about the Latacora 401(k) one day.
- riahi 6y agoThis entirely depends on the plan agreements. I’ve had hospital 401ks that use fidelity and have access to brokeragelink which lets you trade individual stocks.
- gegtik 6y agoThat would track if they simply didn't offer 401k matching. If you read the article it seems more like a bait-and-switch. Employees are in a position to speculatively contribute to their 401K not knowing if the offered match is going to happen. ---- quote ---- It is the third straight year the automaker has not made any contributions to its 401(k) plan, according to the filing. The Tesla Inc. 401(k) Plan automatically enrolls participants in the plan with a deferral rate of 5% of employees' salaries with the option to contribute more, according to the plan's most recent Form 5500 filing. According to the Form 5500, the plan allows for an "employer discretionary matching and/or an employer discretionary non-elective contribution subject to certain eligibility requirements." Those requirements were not met for the 2019 plan year, according to the Form 5500. The nature of those requirements for Tesla to make contributions to the 401(k) plan was not available. The stock price for the automaker was up 695% for the year ended Dec. 31.
- bob1029 6y ago
- Jtsummers 6y agoIt’s not an IRA. 401k plans have very limited options for how to invest the money. Usually some bonds (low fixed rates) and index funds. There’s also usually some targeted funds which balance the risk for you and an “income” fund which is very low risk but tries to do better than the fixed rate bonds. And with an IRA, you can only deposit money not stocks. You have to sell first, deposit the money, and reinvest.
- lvh 6y agoUnclear how the "deposit shares in 401(k)" step works. 401(k) contributions come from salary: you can't just put random things in your 401(k) except in specific circumstances (like a rollover). You can do in-kind transfers _out of_ an IRA (and maybe a 401(k), I'm not sure), but you can't do in-kind transfers _into_ a 401(k) or IRA. IRA contributions have to be cash, 401(k) contributions have to be cash comp. The employer could match with shares in some circumstances, but the point of the article is that Tesla is forgoing all matches, so that's not relevant.
- deleted 6y ago[deleted]
- yohannparis 6y agoI might say that Pension plan are the most effective ways to encourage long-term savings among employees.
- JKCalhoun 6y agoWould you trust a pension plan though? I feel like my entire life I've read about companies going belly up, raided by vulture capitalists, and in the end a court determines that the pensioners get nothing and have no case.
- OldHand2018 6y agoYou’re reading about an extremely small subset of companies with pensions. However, they serve as a very cautionary tale: pensions do not have zero risk. They are very far from it. I’m not sure if I’ve ever seen a risk comparison between defined benefit (pension) and defined contribution (401k) plans. I’d suspect that the defined benefit risk is lower, but not by much. There are two main problems with pensions that I see: 1. The longer you work someplace, the more locked in you are. Pensions are structured such that working at the same place for 40 years is better than working at four different places for 10 years each, even if you get paid the exact same salary. 2. When you die, your children get nothing. With the 401k, whatever your balance is goes to your heirs. You can argue that it is better for society for your children to get nothing: that is a valid point of view. But we have a system in place where some people pass on assets to their children and others do not, and the differentiator between the two is the employer. That’s crazy, and the only logical way to play this game is to be on the winning side.
- yohannparis 6y agoEverything has an inherent risk. But I would prefer an insured and well-managed pension plan that cannot be touched but the company than a personal 401k. Not everybody wants to play wall street games to insure a good retirement plan. I would prefer pay someone to do it.
- closeparen 6y agoIn 50 years will you buy Tesla out of obligation to your elders with Tesla pensions? Or will you buy from a new company with lower prices and better R&D because it doesn’t have pension obligations to pay yet?
- falcolas 6y agoShould offer them some bitcoins as a match, I hear they've invested in some.
- CydeWeys 6y agoI love what Musk's companies are doing, but I would never actually want to work for any of them. They all heavily take advantage of passionate people by overworking and underpaying them, while Musk and the big shareholders alone trap the lion's share of the rewards. Musk is the world's richest person now, but he can't even help fund his employees' retirement? Meanwhile I'm over here getting a 50% no-limit match on my contributions, which is pretty common in tech.
- yohannparis 6y agoWho knows what benefits Tesla employees get. In the U.S.A., retirement matching is not a requirement but a perk. Rolex does a 300% matching, doesn't mean that all Swiss companies do the same.
- sschueller 6y agoCity of Zürich also does 300%.
- throwaway12893 6y agoWow, where do you work with a 50% no limit match?
- lvh 6y ago(I'm not GP.) Latacora has a 100% no-limit contribution match and non-shitty funds (access to all of Fidelity's index funds), loan provisions, and all conversions unlocked for any reason, available on day 1, with all contributions immediately and fully vested. We also eat every fee we're allowed to eat.
- CydeWeys 6y agoWow, that's the dream right there. Do you also have access to after-tax contributions (mega back door)?
- 6y ago
- woeirua 6y agoTesla is one of the stingiest wildly successful companies ever. They're still managing the day-to-day as though they're a scrappy startup that might miss payroll next month. I suppose they can get away with this as long as the stock keeps skyrocketing, but once that ends the low salaries, long hours, and poor benefits are going to come back to bite them badly.
- 0x426577617265 6y agoWhere does their recent purchase of $1.5 billion in Bit Coin fit into this view?
- PietdeVries 6y agoGood question! Why would a company rather invest 1.5B$ in something volatile like bitcoin instead of investing it in the well being of their employees?
- Ekaros 6y agoOr any part of their production and process... Musk has managed to drive the stock price up. But many of his decisions seem questionable from value investor perspective. Or downright self-serving...
- chii 6y ago> instead of investing it in the well being of their employees? because the returns of "investing" in their employee's retirement is not a good ROI for shareholders of tesla. simple as that. There's no humanitarian obligation for tesla to make their employee's retirement great, or any other obligation (other than contractual obligation for payment of wages and benefits already committed). if employees feel that they are short-changed, they _need_ to leave, and let market forces adjust. if they sacrifice their own wellbeing to the "mission" of tesla, that's on them.
- JKCalhoun 6y agoProbably only if the employees unionize.
- tyingq 6y agoGuessing this kind of strategy won't work in the Tesla Berlin factory that's being built now.
- cccc4alll 6y agoIt’s a private company, they can do whatever they want. Most people want to work for Tesla, Spacex for many reasons. 401k match is not in top 10 list. People can vote with their feet and move to another company, if 401k match is deal breaker.
- selljamhere 6y agoTesla has been publicly traded for 10 years. https://finance.yahoo.com/quote/TSLA/ https://finance.yahoo.com/quote/TSLA/
- tidwall 6y agoTesla is not a private company. And private companies cannot do whatever they want.
- Traster 6y ago"It's their money they can do what they want" is a bad argument. I can buy a sandwich in front of a homeless person begging for food and I can break it into pieces and feed it to the birds in front of him. It's my money I can do what I want. It doesn't change that fact it would be a disgusting thing to do to someone. It's generally accepted that if you work with people and they contribute to your success you should recognise that and reward them rather than attempting to exploit their passion as far as possible. Elon Musk absolutely doesn't have to do that, but that doesn't mean people can't judge him for being an asshole.
- chairmanwow1 6y agoThis is kinda non-news. Stock price is up an incredible amount, so employees vesting stock have done extremely well. Were I in their position, I would also forgo 401k matching.
- JKCalhoun 6y agoEnron has entered the chat.... Yeah, I know, snarky. But that is of course the danger of having all your eggs in one basket. Anecdotally, you cite Tesla. Anecdotally I'll come back with Enron.
- chairmanwow1 6y agoFair point. I think the prudent employee should definitely diversify seeing as the stock is certainly overvalued at the present moment. While many people are taking majority positions in Tesla I don’t think it’s ever a good idea for anyone to put all their eggs in one basket ;) Enron or Tesla..
- Taylor_OD 6y agoIts depressing the way a lot of contracts are written to fuck over employees. Look at your employment agreement. I bet your company is allowed to choose not to pay out 401K matches as well.
- virgilp 6y agoMusk replied to this: https://twitter.com/elonmusk/status/1358929114166485008 https://twitter.com/elonmusk/status/1358929114166485008
- sschueller 6y ago"Everyone at Tesla receives stock." with what conditions? What if you are fired or get sick? Retirement should not be a gamble as stock options are. Even GM went bankrupt and whipped out its shareholders many of which where employees investing their money in the "safe" stock GM for retirement.
- CydeWeys 6y agoI get stock but I also get 401k matching too. The two are not the same at all and most good tech employers offer both. Also, what does he think his personal compensation has to do with anything? This is about his employees' retirement plans, not about him. It's only about him insomuch as he's the one ultimately making the decision to be stingy.
- endori97 6y agoWhat is the state of 401k fees? Is it 1% AUM? The PBS doc "The Retirement Gamble" made 401ks look horrible. === Making some reasonable assumptions about a worker with 30 years to retirement, the 1980 version of the 401(k) tax deferral was equivalent to an additional investment return of 9.2% per year, an extraordinary incentive to save for retirement, even without an employer match. Using today’s numbers the benefit comes out to 0.6%, considerably less than the 1% to 2% in fees investors pay in typical 401(k) plans. https://www.bloomberg.com/opinion/articles/2020-07-21/401-k-plans-no-longer-make-much-sense-for-savers https://www.bloomberg.com/opinion/articles/2020-07-21/401-k-...
- CydeWeys 6y agoMany 401k plans have 0% fees and tiny fees on plan investments. I'm paying 0% fees on my 401k plan and absurdly low fees on the Vanguard Institutional Plus funds within it: .01-.04% per year depending on fund. (No that is not a typo.) It all depends on the plan provider. The big ones like Vanguard, Fidelity, Schwab, etc., are all rock solid.
- usaar333 6y agoBaseline questions: Did Tesla ever match 401k contributions? How rare is it for large companies to not do so?
- cphajduk 6y agoOne of my friends who works there is getting ready to retire on the (non-401k) stock options he received (within the next year or two). He's only been out of college for 5 years.
- doug-moen 6y agoIt's fair to point out that all Tesla employees have stock options, whose value increased 595% last year.