6 Ways to Maximize Your Medtronic 401(k) Plan

The Medtronic 401(k) Plan, also known as the Medtronic Savings and Investment Plan, is an excellent benefit. The plan supports Tenant Five of the company’s mission to provide a “means to share in the company’s success”.

401(k) plans are used to save for retirement through a combination of your own contributions and company contributions. A 401(k) often becomes the largest retirement asset you create in your working years. Achieve this at Medtronic by taking advantage of a disciplined savings strategy, company contributions, tax deferral, and potential growth from investment performance. Let’s dig into the six ways to maximize this substantial company benefit.

1. Contribute At Least 6% to your Medtronic 401(k)

Medtronic matches 50% of your contributions up to the first 6% of your eligible pay. That means if you contribute 2% of your paycheck, you will only get a 1% match. If you contribute 10% of your paycheck, the company match will cap out at 3%. Although, this cap should not stop you from deferring as much as you can. Plan to initially contribute at least 6% of your pay to capture the maximum match of 3%. Then set a goal to increase what you contribute over time. You can do this easily by utilizing the auto-escalation feature (see #2).

Additionally, Medtronic may make an additional employer matching contribution each year. This contribution is based on the company’s financial performance and is considered discretionary. While not guaranteed, historically this has added a 1.5% match according to Medtronic’s published information. They state that over the last decade the company match averaged 4.5% for employees who contributed at least 6%. This additional contribution is made at the end of the “plan year” (see #3). Keep in mind that you must be an active employee on the last day of the plan year to receive it.

2. Use the Auto-Escalation Feature

Medtronic’s plan allows you to contribute from 2-75% of your eligible pay up to the IRS limits.

For 2025 those limits are:

If those amounts seem daunting, use the plan’s built in auto-escalation feature to help you continue to save more. This feature sets your account to increase by a choice percentage each year until IRS limits are reached.

Medtronic 401(k) Auto-Escalation Feature

By default, this feature is set up for new employees auto-enrolled in the plan after the first 60 days of employment. For those auto-enrolled, the escalation feature increases 1% per year for years two through five of employment. Continuing until the contribution level reaches 10%. However, you can make your own election for this auto-escalation feature to go beyond that level.

Consider what your likely increase to salary might be based on your job position and department salary increase history. With this rough estimate, set up your auto-escalation to use up part or all of the increase. For example, if you were to get a 5% pay increase, consider setting up the auto-escalation for 3%. In doing so, you could get up to contribution maximums in a few years while still increasing your take home.

The auto-escalation takes place by default each August if you have been auto-enrolled in the plan. You can elect your escalation percentage and yearly occurrence on the web portal. If you know approximately when annual salary increases take effect, you can set up to coincide with the increased payroll. You can also make a yearly election manually after you learn what your raise will be. However, we’ve found employees have better success when they set it and forget it.

Auto-escalation helps you reach your maximum plan contribution level more easily and quickly. This is an excellent feature of your Medtronic plan, and not one we see commonly, so be sure to capitalize.

3. Stay Long Enough to Fully Vest

You’ll need to stay at least 3 years to meet the 3-year cliff vest criteria on the plan. This ensures all employer matching contributions, Medtronic core contributions, ESOP contributions, and personal investment account contributions are vested. Depending on your hire date, other vesting schedules may apply as well.

In addition to the 3-year vesting on company contributions, be aware of the plan year timeline. To capture the current year of certain contribution types, you’ll need to work through the end of this plan year. Medtronic’s plan year ends April 30th and you must be an employee on this date to count on the below contributions. The exception here is death, retirement on or after age 55 with 10 service years, or age 62 regardless. These contributions include:

• “Additional” Company Matching
  • The discretionary amount above Medtronic’s base match based on the company’s financial performance. While the base match is made each pay period, this additional match happens at the end of the plan year.
• Matching “True-Up” Contributions
  • Used to make adjustments that ensure all the base match was allocated. For example, this occurs when a participant hits the maximum payroll deferral amount part way through a plan year.
• Medtronic Core Contribution
  • The 3% as well as the personal investment account contribution of 5% are also made end of plan year.

Things to Consider Before Leaving Medtronic

If you are planning to pursue other opportunities near the plan year’s end, consider negotiating your next position’s start date. This could allow you to remain with Medtronic long enough to avoid foregoing your employer contributions.

For instance, let’s say you were earning $100,000 per year. Leaving before the plan year’s end without having 3 years vested you could be leaving $22,500-$28,500 on the table. This number includes the following:

• 3% base match of $9,000 ($100,000 x 3% x 3 years)
• Historical 1.5% discretionary match of $4,500 ($100K x 1.5% X 3 years)
• Medtronic Core of $9,000 ($100K x 3% x 3 years) OR personal investment account of $15,000 ($100K x 5% x 3 years)

Keep in mind that if you leave but might return within five years, you get your unvested contributions back. These contributions are restored at face value, no gains or losses. This could weigh in favor of returning to Medtronic over other opportunities at the time.

4. Minimize Your Medtronic 401(k) Fees

Fees in the Medtronic 401(k) plan come in the form of plan administration, service-based, and asset-based.

Plan Administration

Fees associated with the day-to-day management of the plan. As a participant in Medtronic’s 401(k) plan these fees are out of your control. However, it is important to understand how your plan’s administration fee compares. If you have limited cash flow, this could make the difference between utilizing your spouse’s plan for contributions.

Service-Based

While these fees are generally small and infrequent, they can still impact your savings over time. Examples include charges for initiating loans, withdrawals, distributions, ESOP dividend payments, and QDROs. The most significant service-based fee is for what is often referred to as “personalized planning and advice”. This is an optional service where the plan’s investment advisor creates and monitors an investment portfolio for you. This service typically costs around 0.30%. Whether this is worth the money depends on your priorities. While these often include some level of coaching, the advice is usually less personalized than what you might receive from a financial advisor. Further, it may not fully align with your personal values and long-term financial goals.

Asset-Based

These fees are the ones you can actively work to minimize to reduce the drag on your account’s returns. The annual gross expense ratios of the investment options available range from 0.014% to 0.33%. While these are low ratios, you could be using one investment option that is 20X more expensive than another. Although building your own portfolio requires regular monitoring to maintain, it can be significantly more cost-effective. Up to 5 to 15X less expensive than relying on the default Target Date Fund options.

5. Invest Your Medtronic 401(k) Wisely

If you auto-enrolled into the plan with no changes made since, chances are you’re invested in a Target Date Fund. The default is typically the fund that most closely aligns your plan’s assumption of retirement at age 65. While this is far from a mistake, it may not be optimal for your situation. This might be more conservative or aggressive than your individual needs. Further, the assumption of an age 65 retirement might not be correct for you. You could miss out on growth if you work longer and your investment account has adjusted conservatively too soon. Conversely, you may plan for an earlier retirement and your mix of investment assets is holding too much risk.

We find that clients we work with from Medtronic benefit from reviewing their portfolio and adjusting each year as needed. Both to adapt to the changing economic environment and to adjust for their retirement planning outlook.

Medtronic 401(k) and BrokerageLink

To provide significantly more selection of investment vehicles, Medtronic’s plan has a feature called BrokerageLink. This allows participants to open a brokerage account with Fidelity to use for their 401(k) account investments. Doing this opens the possibility of low-cost options that replace or supplement the plan’s main list. For example, compared to portfolios we build for clients, the core line up is missing at least five asset categories. Including US Large Value Stocks, US Mid & Small Stocks, International Mid & Small Stocks, Emerging Markets Stocks, and Foreign Bonds. It also creates the option to access specialty investment options to round out your portfolio.

Fidelity has mutual fund options with as low as zero net expense ratios and many in the 0.02%-0.10% range. You could save 5-10X compared to Target Date Fund options in the plan by creating your own portfolio using BrokerageLink. Navigate this is at your own risk and consider that it does require ample time and attention. However, if you are working with an investment advisor they may assist you need as part of their service. We offer this as part of our comprehensive planning services to our clients employed by Medtronic.

6. Front Load Your Contributions

Consider increasing the percentage of your deferral contribution to hit the IRS limits as soon as possible in the year. Medtronic implements a matching “true up” adjustment at the plan year’s end to equalize the match making this strategy possible. Strategies to complete this include timing larger contributions with bonus payouts or living off savings during heavy contribution months. If you can live off a reduced paycheck for a few months, defer up to the 75% of eligible pay limit to max out earlier in the plan year. In return, your account benefits from tax deferral earlier. As well as potential growth from being invested longer than if you took the year to make contributions. Over time this added compounding has the power to significantly increase your long-term gains.

Resources

Looking For a Financial Advisor for MedTech Professionals?

ESPPs: A Comprehensive Guide

Are you a Medtronic employee needing guidance with your Medtronic 401(k) plan, other investments, or retirement planning? Schedule a pressure-free Vision Call today!

Questions? Contact Us

All information comes from sources we believe were accurate at the time of writing. This includes the Medtronic 401(k) Summary Plan Description, Participant Disclosure, and various company benefits brochures.