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What is Employer Match?
Employer match, or company match, is a benefit some employers offer their employees as part of their retirement savings plan, such as a 401(k) or 403(b) plan.
With an employer match, the employer agrees to match a certain percentage of the employee’s contributions to their retirement account up to a certain amount. For example, an employer might offer a 50% match on the first 6% of an employee’s salary that they contribute to their retirement plan. This means that if an employee contributes 6% of their salary to their retirement plan, the employer will contribute an additional 3%.
Does Employer Match Count Towards 401k Limit?
Yes, employer match contributions count towards the annual 401(k) contribution limit set by the IRS.
For 2023, the annual contribution limit for 401(k) plans is $20,500 for employees under 50 years old and $27,000 for employees who are 50 or older, including catch-up contributions. However, the total combined contributions from the employee and employer cannot exceed $61,000 for those under 50 or $64,500 for those 50 or older for 2023.
For example, if an employee contributes $10,000 to their 401(k) plan for the year, and their employer offers a 50% match on contributions up to 6% of their salary, which amounts to $3,000, the total contribution made to their 401(k) for the year would be $13,000 ($10,000 + $3,000).
How Much Do Employers Match 401k?
The amount an employer matches for an employee’s 401(k) contribution varies depending on the employer’s plan and policies.
Typically, employers will match a percentage of the employee’s salary up to a certain limit. For example, an employer may match 50% of an employee’s contribution up to 6% of their salary. This means that if the employee contributes 6% of their salary to their 401(k), the employer will contribute an additional 3% (50% of 6%).
Some employers offer a dollar-for-dollar match, while others offer a different percentage or limit. Employees need to review their employer’s 401(k) plan to understand the matching policy and take full advantage of the matching contributions offered.
Also, See: Matching Contribution
