Abstract
Recently, several states and cities have enacted equal pay laws in a push for pay transparency in job postings to inform and help reduce wage gaps. Some of these laws also require a description of the employee benefits that the company offers. However, none of these laws require a detailed description of said benefits, even though employee benefits on average make up 24% of an employee’s compensation.
Businesses can choose how much to disclose with respect to their benefits and they may even engage in what this author calls “benefits washing”—a practice where companies provide vague or misleading information about their employee benefits. This discretion is problematic. Workers make decisions on where to apply and where to work based on information obtained on the internet, such as company websites. But these company disclosures do not divulge enough information to properly value the benefits. For example, many people do not understand that 401(k) plan features differ significantly across employers.
Mandatory detailed, succinct disclosure of employee benefits—specifically 401(k) plan benefits—is a public necessity as these benefits are exceedingly complex. Myriad stakeholders—employees, jobseekers, consumers, investors, and companies—would find more detailed, understandable disclosure of interest. For example, some consumers and investors—including ethical consumers and ESG investors—seek to align their purchases and investments with companies that treat their employees fairly. Additionally, people do not have enough saved for retirement, which not only poses a problem for them but also for taxpayers. And requiring companies to disclose their vesting schedules and other plan features will help companies better assess their own benefits and perhaps nudge or shame them into providing more favorable benefits. One would also hope that the prevalence of such detailed disclosure would help to normalize the value of retirement saving to all stakeholders.
We must not capitulate to the legal fantasy that companies will provide detailed and accurate information willingly, even if it may help the companies themselves. As such, this author calls on the government to mandate benefits transparency.
This Article contends that benefits transparency is essential particularly with respect to complex benefits like 401(k) plan benefits. Governmental regulation mandating detailed disclosure where stakeholders expect to see it is necessary to bring such transparency to fruition in an organized, comparable manner. This could be accomplished by state and local governments in their equal pay/pay transparency laws, or federally through Department of Labor rulemaking or an amendment to ERISA. The SEC and FASB could also require such disclosure for all publicly traded companies. So long as there are enforcement and penalties with teeth, we could see vital benefits transparency take hold.
Repository Citation
Samantha J. Prince,
Benefits Transparency,
108 Marq. L. Rev. 37
(2024).
Available at: https://scholarship.law.marquette.edu/mulr/vol108/iss1/4