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An employer matching contribution can be a valuable part of a company’s employee benefits package. Employer contributions are also deductible on the company’s tax return. Our plan allows an employer to choose whether they want to offer an employer match, and to further choose whether they want to do it through a discretionary or safe harbor matching provision.

With a discretionary match, the employer can make matching contributions to the accounts of employees making voluntary 401(k)/Roth 401(k) deferral contributions while maintaining a high level of flexibility. The employer can choose their own matching formula – common matching formulas include 100% of the first 2% of an employee’s compensation deferred into the plan, 100% of the first 3% of compensation deferred, or 50% of the first 6% of compensation deferred, but the employer is not limited to these examples.

The employer can also change or stop the matching contribution midyear if the company’s circumstances change. The employer has the option to put a vesting schedule on discretionary matching contributions, as well as additional allocation requirements. For example, some employers only make a matching contribution to individuals who worked a minimum number of hours during the year and/or were employed on the last day of the year.

Offering a match can also be a great tool for encouraging plan participation. An employee who isn’t deferring at least enough to get the full employer matching contribution is giving up free money!