Most traditional strategies dictate that a client should first contribute to an employer-sponsored 401(k) to the extent needed to gain the benefit of a full
employer matching contribution.
o Adopt new approaches: Holding one-on-one and group employee meetings, offering an attractive
employer matching contribution and implementing automatic features were identified as effective in terms of addressing plan challenges.
Some employers might think that contributing the full
employer matching contribution would be a good start, but that won't cover employee needs in retirement, Eschtruth said.
In the past, this has allowed the Company to provide a meaningful
employer matching contribution to employees who have contributed money from their paychecks to the Company's 401(k) retirement plan.
It also provides comprehensive benefits including an employee savings plan with an
employer matching contribution and flexible work arrangements such as a 35-hour work week and telecommuting options.
A firm has considerable flexibility under a qualified plan to structure the
employer matching contribution.
To be a qualified automatic enrollment feature, the plan must provide for either an
employer matching contribution or a profit sharing contribution.
In the latter option, the employer contribution is a dollar-for-dollar match of an employee's pre-tax contributions up to 3 percent of compensation and a 50-cent match for each dollar of employee pre-tax contributions between 3 and 5 percent of compensation, for a maximum
employer matching contribution of 4 percent of compensation.
The
employer matching contribution can be reduced to as low as 1%, but only for two years during a five-year period.
This part of the discussion draws on a recent paper that I co-wrote that discusses the costs and benefits to firms of providing the
employer matching contribution in company stock.
The most popular feature was an
employer matching contribution of up to 5% of the employee's salary, with strong appeal for 31% of the workers sitting on the sidelines.
