What is a 401(k) employer match?

A match is free money your employer adds to your 401(k) based on your personal contributions, up to a certain amount.

Updated over a week ago

A 401(k) employer match is money your company contributes to your 401(k) account. If your employer offers 401(k) matching, it means they will match the contributions you make, up to a specified threshold.

An employer match offers you an opportunity to earn free money for your retirement accounts. To take advantage of the full contribution, you may wish to consider personally contributing at least as much as the percentage your employer has offered.

You can see if your employer provides a match within your Guideline dashboard under the Plan Details page.

How are employer matching contributions calculated?

Employers may offer a partial or full match, or a combination of the two.

​How a partial match works

With a partial 401(k) match, an employer offers to match a fraction of your contributions, up to a certain percentage.

Let’s say you earn $50,000 annually and contribute 4% of your salary, or $2,000, into your 401(k) for the year. If your employer matches 50% (or half) of each dollar you contribute up to 4%, they would add $1,000 to your 401(k) account each year.

Alternatively, if you contribute only 2% of your salary, or $1,000, into your 401(k) for the year, your employer would add $500 to your account each year. Decreasing your contribution rate to below the amount necessary to receive the entire match means you miss out on $500 worth of employer contributions for that year.

​​How a full match works

A full match (also known as a dollar-for-dollar match) is when an employer matches 100% of your contribution, up to a certain percentage.

Say your employer offers a 100% match on up to 4% of your salary, and your salary is $50,000. If you contribute 4% each pay period over the year, you’ll be personally contributing $2,000 over the year and your employer will contribute an additional $2,000 into your 401(k) – essentially doubling your money. But, just like with the partial match, lowering your deferral amount below what your employer offers means you won’t get access to all the money available through the match.

Some employers may also choose to offer a combination of full and partial matching. For instance, your company may provide a 100% match up to 3%, then 50% up to 6%.

Are there contribution limits for an employer match?

The IRS has specific limits to how much money can be contributed to your 401(k) account each year. These limits may change annually to account for variations in the cost of living.

The annual deferral limit is the maximum you can contribute to your account personally. The annual additions limit determines the total combined dollar amount that may be contributed to your 401(k) from your personal contributions as well as employer matches.

What if my employer doesn’t offer a match?

Even if your company doesn’t offer matching contributions, you can still take advantage of your 401(k)’s other benefits including:

  • The ability to reduce your current income taxes

  • Tax-free growth on contributions made until distribution

  • The ability to transfer funds between employer plans if you change jobs

  • Effortless automatic deductions from your paycheck

  • A potential Saver's Credit on income taxes for qualified participants

Some employers may choose to contribute to employees through another benefit known as profit sharing (sometimes called nonelective contributions). You can learn more about 401(k) profit sharing here.

This information is general in nature and is for informational purposes only. It should not be construed as investment advice. Investing involves risk and investments may lose value. Consult a qualified financial adviser.

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