When an excess payment is received, the company is keeping the difference. A refund will be issued only if the payer complains. Wouldn’t this make the financial statements inaccurate because profit looks better if there is no refund? How does this work with GAAP revenue recognition? The cash flow statement should be really interesting.
The 401k has a 3% match, which is paid every 2 weeks with the paycheck. It vests after year 3 at a rate of 20% per year. The new 401k matching policy is to accumulate and pay the 1 year of matching contributions in the first quarter of next year. If the employee leaves, the match is not paid. The paltry 0.6% match (20% of 3% vested) that is lost by leaving is not going to deter people from leaving. It only hurts those who are staying because now the matching contribution is idle and does not grow for 1 year. On top of that, the lump sum payment in the first quarter would cause a large amount of equities to be purchased at the same time (for those who are investing in the stock market), thereby causing the price to rise due to extra high demand. This makes the 401k grow slower but the company has more cash. Those who are fully vested may stay to get the match, so the company would eventually end up with a lot of gray haired people who are stuck in their old ways.
If a company is pinching pennies by keeping others’ money and playing with cash float, is that an indication that it is in trouble? How about the reduction in benefits? Do you have any moral or ethical concerns? Would you trust a hospital with these questions?
