Matching Contribution

Money an employer offers to an employee's IRA or other retirement plan. Normally employers will offer an equal amount that the employee contributes up to a certain dollar amount or percentage of income. This is considered an employee benefit and allows a worker to save more (and accrue applicable interest) without enduring financial hardship.

Matching contribution.

A matching contribution is money your employer adds to your retirement savings account, such as a 401(k) or a SIMPLE.

It's usually a percentage of the amount you contribute up to a cap that the employer sets, such as 50% of your contribution up to 5% of your salary. The matching amount and any earnings are tax deferred until you withdraw them from your account.

In most plans, employers are not required to match contributions, but may do so if they wish. Employers also determine, within federal guidelines, how long you have to work for the company in order to be fully vested in the matching contributions.

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References in periodicals archive

Despite 20-plus years of advertising and matching contribution programs -- and, more recently, default contributions (automatic enrollment) programs -- a sizable percentage of participants remain left behind or have seen their savings "leaked out." Because 401(k) plans provide for participant asset-allocation decisions (recently mitigated by the use of target-date funds) and a retail mutual fund investment model, with accompanying retail fees, 401(k) plan investments underperform DB investments.

We Need a New Plan

401(k) plan." It provides for a mandatory, fully vested employer nonelective contribution or matching contribution that will result in the plan automatically passing the ADP and ACP tests.

Combining a "safe harbor" sec. 401(k) plan with a new comparability defined contribution plan

An employer satisfies the ADP safe-harbor matching contribution requirement if it implements either a basic matching formula or an enhanced matching formula.

The safe-harbor solution

Typically, payroll services or third-party administrators make errors when a 401(k) plan has a matching contribution subject to a percentage-of-pay ceiling.

Maximizing retirement plan benefits

If an employer elects to make a safe-harbor matching contribution, it must be no less than 100% of the first 3% of an employee's deferred compensation, plus an additional 50% match on the next 2% of the employee's deferred compensation.

Safe-harbor sec. 401(k) Plans

If an employer elects the matching contribution safe harbor, the rate of any HCE matching contribution cannot exceed the rate used for any non-HCE.

Sec. 401(k) nondiscrimination safe harbors

The deferrals would still be subject to Medicare withholding and the matching contribution. On the other hand, if the employer wanted to defer FICA payments, the nonqualified deferred compensation plan could be structured to include a vesting schedule for the deferred amounts over a predetermined number of years.

Deferred compensation and FICA rules under proposed regs

The FCA US 401(k) plan features: immediate eligibility for all employees including automatic enrolment and automatic escalation; a company matching contribution equal to USD0.50 of every dollar contributed up to 10 percent of deferred pre-tax base pay or a Roth, with immediate 100 percent vesting; a 3 percent (of base pay) unmatched company contribution with a three-year vesting schedule; 12 target date funds and 12 core menu investment fund options, among others.

FCA US Salaried Employee 401(k) Plan receives 'Best-in-Class' Award

Let's say an employee contributes up to the $19,000 limit in 2018, receives a matching contribution of $2,500, and a profit sharing contribution of $1,500.

Should we allow after-tax contributions into our 401(k) plan?