A growing number of employers have increased their company match to the 401(k) plan, according to a recent survey from Aon Hewitt.
The most common match is now $1.00 per $1.00 on the first 6% of employee deferrals, with 19% of employers reporting this formula, up from 10% in 2011. Previously, a match of $0.50 per $1.00 on the first 6% was the most popular. Overall, nearly all employers (98%) provide some sort of employer contribution to the plan.
But Rob Austin, director of retirement research at Aon Hewitt, cautions the data shouldn’t be interpreted as employers simply having doubled their match without doing anything else. “Part of it is that when companies change from their defined benefit plan to a defined contribution only plan, they sweeten their match overall and so we’re seeing some companies who’ve changed their match in concert with other retirement benefit offerings,” he says.
In addition, some employers “know that where they set the match threshold has a lot to do with where employees are going to be saving,” he says. “So there could be some organizations who, in the past, were matching a little bit differently but want to push it out to 6% and that’s why we’re seeing that be the more popular match overall right now.”
The survey of 400 plan sponsors also shows employers are relaxing eligibility requirements for employees entering the 401(k) plan. Seventy-six percent of plans now allow workers to begin making pre-tax contributions immediately upon hire, up from 71% in 2011. In 2001, just 45% of employers allowed for day-one contributions. Fifty-three percent of plans, meanwhile, have corresponding immediate eligibility for employer-matching contributions, while 50% of plans that offer a non-matching employer contribution allow immediate eligibility.
