Employer Match

What is Employer Match?

 

What is Employer match (company match)? An employer match, or company match, is a benefit that some employers offer their employees as part of their retirement savings plan, such as a 401(k) or 403(b) plan.

 

If an employer matches, the employer will match a percentage of the employee’s retirement account contributions up to a specific maximum. For instance, an employer may match 50% up to the first 6% of a worker’s salary that is contributed to their retirement fund. For example, let’s say an employee contributes 6% to a retirement plan from their salary; the employer must match it with 3%.

Does Employer Match Count Towards 401(k) Limit?

 

So, employer match contributions do count towards the annual 401(k) contribution limit per IRS regulations.

 

In 2023, the employee contribution limits for 401(k) plans are $20,500 per year for employees under age 50 and $27,000 per year for employees age 50 and older; this also covers catch-up contributions. The most that can be put into the plan on an annual basis is $61,000 for those under 50 and $64,500 for those age 50 or older.

 

For example, if an employee makes a $10,000 contribution for the year to their 401(k) and their employer offers 50 cents on the dollar up to 6% of pay— or $3,000 — then the total year’s contribution made in their behalf is $13,000 ($10,000 + $3,000).

 

How Much Do Employers Match 401(k)?

 

An employer’s 401(k) match to an employee’s contribution amount will depend on the specific plan and policies the employer has in place.

 

Employers usually pay dollar-for-dollar on the employee’s earnings up to a certain cap. For example, an employer might offer up to 50% of the employee’s contribution dollar-for-dollar, matching up to 6% of the employee’s salary. In other words, if an employee gets 6% of their pay deposited into their 401(k), the employer will deposit another 3% (equivalent to half of the 6%) for them.

 

Employers may offer a dollar-for-dollar match, or the rate of match can vary or be capped at a certain level. Employees should refer to their employer’s 401(k) plan for the terms of the matching to ensure they maximize any matching contributions available.

 

Also, See: Matching Contribution