What are my employer matching contribution options?

Matching enables an employer to contribute a percentage of employee deferrals up to a self-defined limit. Employers can choose between Safe Harbor and discretionary matching contributions. 

A Safe Harbor Matching Contribution ensures that all eligible employees are provided a fair opportunity to benefit from the plan and exempts plans from annual nondiscrimination testing. Please note that Safe Harbor contributions must be immediately vested. Feel free to review this article on vesting options for more information. 

Here are examples of the different Safe Harbor matching contribution formulas:

  • Basic Safe Harbor Match: The employer matches 100% of employee contributions up to the first 3% deferred, and then 50% of contributions on the next 2% deferred.
  • Enhanced Safe Harbor Match: The employer can provide a more generous match than the Basic Safe Harbor Match with an Enhanced Safe Harbor Match that will match deferrals up to and including 6% of compensation. 

Safe Harbor plans may be amended effective January 1st of each year with notice provided to employees at least 30 days in advance. To add a Safe Harbor matching provision to your plan, reach out to our plan administrator support team.

Discretionary Matching Contributions allow the employer to decide which percentage of employee deferrals to match and provides the employer with the ability to adjust matching amounts as business needs change. For example, a company may offer a 25% match of employee deferrals up to 5% of compensation, and the employer may change or suspend this discretionary match at any time. Vesting schedules can apply to discretionary matching contributions. Vesting schedules can help to reward long term employees, and forfeitures of unvested amounts can be used to offset employer costs. 

See this article to learn more about employer matching calculation methods.

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