Megacompany Employee Churn Meets 401(k) Vesting Schedules: A Sabotage on Workers' Retirement Wealth

48 Pages Posted: 13 Apr 2022

Date Written: March 10, 2022


Deliberate employee churn and the Great Resignation are two phrases that describe the latest change in work. Some employers, notably Amazon, deliberately churn employees to avoid a “march to mediocrity” by implementing appalling working conditions and policies that result in employees quitting. Additionally, the COVID-19 pandemic brought forth not just job losses but masses of voluntary resignations, particularly by lower-paid workers. When workers change jobs more frequently, they lose an ability to accumulate retirement wealth due in part to the use of disadvantageous, but legally permissible, 401(k) vesting schedules by a majority of America’s employers.

Retirement wealth inequality and retirement security are issues that the United States has been grappling with for years. Low-paid and minority workers are directly impacted and suffer from these issues the most. This article shows that sizeable high turnover companies are abusing the system by using 401(k) plan vesting schedules to their own benefit and to worsen retirement wealth inequality.

Here, the spotlight is on Amazon, one of America’s largest employers and one that has very high employee turnover. In order to be vested in one’s employer 401(k) matching contributions at Amazon, an employee must be there for three years—a requirement that is not being met given the much quicker turnover in their low-paid workforce.

When Amazon and other companies, like Home Depot, consistently have high turnover and use a vesting schedule, the employees lose, and the companies win. These companies know they have high turnover and turn a blind eye toward the inequities created by using a vesting schedule that will result in those employees losing their benefits. Further the companies are allowed to re-use contributions they’ve made on an employee’s behalf for other employees and to reduce their plan administrative fees. As a result, companies enjoy a windfall through the reduction of compensation costs. This all comes at the expense of the employees and exacerbates retirement wealth inequality for marginalized groups. These companies are sabotaging the retirement system.

Until now, there has not been discussion about the grossly unfair result of mixing high employee turnover and 401(k) plan vesting schedules. This article argues two main premises. The first argument aligns with President Biden’s order to governmental agencies to step up their data collection to quantify the inequities in the legal system. We need to collect more specific data on gender, race, and pay of those who terminate prior to vesting. This will allow us to assess the impact of vesting schedules on retirement plan inequality. The article then argues that megacompanies should be foreclosed from using vesting schedules in their retirement plans. They simply employ too many people, and many are in high turnover businesses. It is against public and retirement security policy to allow high turnover megacompanies to abuse the system by using vesting schedules in their 401(k) plans.

Keywords: retirement wealth inequality, employee churn, employee turnover, 401(k) plans, 401(k) vesting schedules, Amazon, Labor, Financial Literacy, Retirement Security, Pension, Employment law, Generational Wealth

Suggested Citation

Prince, Samantha J., Megacompany Employee Churn Meets 401(k) Vesting Schedules: A Sabotage on Workers' Retirement Wealth (March 10, 2022). Available at SSRN: or

Samantha J. Prince (Contact Author)

Penn State Dickinson Law ( email )

150 S College Street
Carlisle, PA 17013
United States

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