NCMIC’s Profit Share Gives Boost to 401(k)s
March is a lucky month, indeed, and on Wednesday, March 22, many employees will find a bit o’green in their 401(k) thanks to NCMIC’s discretionary profit-sharing contribution.
Due to NCMIC’s solid company performance in 2022, a 6% contribution, in addition to the regular company 401(k) match of 6%, will be deposited directly into employees’ 401(k) accounts. To be eligible, you must have been employed on 12/31/2022 and worked a minimum of 1000 hours in 2022.
The INsider sat down with NCMIC’s Chief Investment Officer, David Baccile, to get the details behind the company’s profit share program and how it benefits employees.
How does the profit share work?
The great thing about it is employees don't have to do anything. They don't opt in. They don't have to put any money into it to get a match — this is all money that is put into an account for the employees for their benefit. We call it a profit share because unlike a retirement plan—which as a company we are obligated to fund—the profit share is discretionary. That means that management and the board can decide every year whether or not to fund a profit share. When the company meets its profit goals—every year we set up a budget—then we can share some of that profit with employees. So, once a year, all employees will receive their share of the profit share.
One thing to note is that the profit share is not discretionary on a person-to-person basis. What that means is when management and the board decide to extend the profit share to employees, there is an IRS formulation that ensures that employees are treated fairly across the board and all employees get treated equally. Every employee gets the same percentage of the profit.
Is the percentage the same every year or is that determined year after year?
So far it's been the same every year. When profitability is higher, that percentage would go up, but in a year where profitability is lower, there would be a profit share, but it might be at a lower percent.
What does it mean long term for employees to be able to participate in the profit share?
It’s important to understand that while it does go into the 401(k), we have to make sure that we are separating this from a 401(k) plan. From the standpoint of the 401(k), if an employee puts in 3%, then they get matched 3%. If they put in 6%, they get matched 6%. What the this does as a whole retirement package is that it just makes our retirement benefits very attractive. When you think about the fact that, if you maximize your 401(k) and you put in 6% and NCMIC matches that 6%, now you're up to 12% of your pay that's getting set aside. If we're able to do the profit share, then we're talking about another 6%. So, you know, in a good year when you've fully maximized your 401(k) and the company has profit, you know, you're talking about 18% of your compensation being set aside for your retirement. That’s a really generous package and it will be very meaningful when an employee retires.
Wealth is grown over a long period of time, and you have to be patient. I would encourage people to go out and play around with some retirement calculators to see what it looks like to put in a certain amount of money and what its value is 20 or 25 years from now. I think when you start to see those numbers and how big they are, you start to realize the impact.
Anything else employees should know about the profit share?
I would encourage employees to share their feedback. Whether it's a profit share or any other benefit you like or appreciate, let senior management know. The more we hear positive feedback on benefits, the more likely they are to be funded, the more likely they are to be there in the future.