PROFESSOR PRINCE’S CO-AUTHORED ESSAY ON THE EFFECTS OF 401(k) VESTING SCHEDULES PUBLISHED BY YALE LAW JOURNAL
September 2024 — Professor Prince’s co-authored essay, The Effects of 401(k) Vesting Schedules — in numbers, written with Timothy Azizkhan ’25, Luke Gorman ’25, and Cornell PhD candidate, Cassidy R. Prince, has been published by Yale Law Journal Forum as the lead article in Volume 134.
The empirical findings show with certainty that corporate giants, through their use of vesting schedules, are abusing our retirement system at the expense of vulnerable, short-tenure workers. Vesting schedules are iniquitous mechanisms that companies use to financially benefit themselves. While such mechanisms do not discriminate against who they snatch retirement savings away from, the effects on protected classes such as low-income workers and people of color can be colossal, compounding societal inequities.
Prince and her team analyzed 909 401(k) plans for the year 2022. In that 2022 plan grouping, they found that over 1.8 million workers forfeited their employer 401(k) contributions due to vesting schedules. And that in 2022, a staggering $1.5 billion was used by company plans to offset their employer contributions. This high amount of money represents funds that plan participants forfeited due to terminating employment (voluntarily or involuntarily) before vesting occurred. Amazon and Home Depot are the top offenders, holding the highest number of affected participants over the past 3 years. And in one year alone, Amazon used $102 million of funds — that should belong to its former employees but were instead forfeited — to reduce its matching contribution obligation. The United States is amidst an increasingly concerning retirement savings crisis, and companies like Amazon continue to recycle these forfeited funds in ways that grossly impact people’s ability to adequately accumulate retirement wealth.
This essay presents not only data regarding the plans that negatively impact workers the most, but also shows that corporate giants can be both successful and set up their employees to be financially secure for retirement. Several examples are presented where pervasive vesting schedule users have direct competitors that immediately vest their employer contributions.
This empirical work, inspired by Professor Prince’s scholarship in the retirement benefits space, supplements and supports arguments made in her previous articles: Megacompany Employee Churn Meets 401(k) Vesting Schedules: A Sabotage on Workers’ Retirement Wealth, Employee Turnover & Partial Plan Terminations, and Benefits Transparency.
Professor Samantha Prince is an Assistant Professor of Law and Director of Legal Analysis & Writing at Dickinson Law. She has a Master of Laws in Taxation from Georgetown University Law Center and was a partner in a regional law firm where she handled transactional matters that ranged from an initial public offering to regular representation of a publicly-traded company. Most of her clients were small to medium sized businesses and entrepreneurs, including start-ups. A significant part of her practice was in employee benefits including retirement plan design and operation. An expert in entrepreneurship law, she established the Dickinson Law entrepreneurship program, is an advisor for the Entrepreneurship Law Certificate that is available to students, and is the founder and moderator of the Inside Entrepreneurship Law blog. Her research mainly comprises the changing world of work.