Company Matches on the Rise
While company matches to defined contribution (DC) plans are by no means universal, they have multiplied in the past year, now being offered by more than two-thirds (76.5%) of corporate employers, according to the 2019 PLANSPONSOR Defined Contribution Plan Benchmarking Report. This is up from 73.3% in 2017.
It is noteworthy that, back in 2009, just after the Great Recession, 5% of the total plan sponsors offering a match had suspended it and another 5% reduced it.
In times of economic hardship, companies sometimes make the decision to pull back on retirement plan contributions. Yet, as the country has long since exited the recession and markets are seeing new highs, it makes sense that companies may again want to share revenue with their workers.
The rise in company matches jibes with the results of a survey Nationwide conducted in late 2017, which found that 50% of 1,700 business owners with fewer than 300 employees planned to increase their 401(k) match, with 55% of this group attributing the change to rising revenue.
As plan size increases, so does the likelihood the sponsor company will offer a match, the DC Plan Benchmarking Report notes, stating that 70.8% of micro plans, 78.1% of small plans, 78.3% of midsize plans, 80.2% of large plans and 85.7% of mega plans offered them. That is a spread just shy of 15 percentage points—viz., 14.9 points—between micro and mega plans when it comes to matches.
As far as the type of match, 36.3% of employers reported using a traditional formula, but 31.3% use a stretch match and 20.4% a tiered match.
Key Incentive
Offering a match gives workers an important incentive to participate in the company plan. A recent Natixis survey found that, among nonparticipants, 34% never joined the plan because their employer does not offer a match or the match is too small. By comparison, the top reason given for participating in their DC plan was the company match, cited by 56% of respondents. By generation, this broke down as 56% of Millennials, 56% of Generation X and 53% of Baby Boomers.
By far, matches are most commonly distributed each pay period, as cited by 76.6% of employers, the DC Plan Benchmarking Report says.
Matching Contribution Status
| Overall | Micro | Small | Midsize | Large | Mega | |
| Offers | 76.5% | 70.8% | 78.1% | 78.3% | 80.2% | 85.7% |
| Does not offer | 23.2% | 28.4% | 21.8% | 21.7% | 19.5% | 14.3% |
| Unsure | 0.3% | 0.8% | 0.1% | 0.0% | 0.3% | 0.0% |
Employer Match Formula
| Overall | Micro | Small | Midsize | Large | Mega | |
| Offers | 7.5% | 7.8% | 6.6% | 8.5% | 8.8% | 7.4% |
| 100% of first 6% of salary | 14.8% | 15.2% | 13.5% | 12.5% | 16.4% | 20.3% |
| 51%–99% of first 6% of salary | 31.2% | 33.8% | 27.2% | 28.8% | 33.6% | 39.6% |
| 50% of first 6% of salary | 22.3% | 19.6% | 24.9% | 24.8% | 20.6% | 18.3% |
| <50% of first 6% of salary | 15.1% | 13.4% | 18.6% | 17.9% | 11.3% | 5.9% |
| Other | 9.1% | 10.0% | 9.2% | 7.5% | 9.2% | 8.4% |
Matching Contribution Frequency
| Overall | Micro | Small | Midsize | Large | Mega | |
| Non-pay period: Annually | 13.9% | 14.6% | 14.5% | 14.9% | 10.7% | 10.3% |
| Non-pay period: Quarterly | 2.6% | 1.5% | 3.1% | 3.4% | 3.8% | 2.1% |
| Non-pay period: Monthly | 2.3% | 3.7% | 2.2% | 1.4% | 1.0% | 0.4% |
| Non-pay period: Twice monthly* | 1.0% | 1.6% | 0.6% | 0.7% | 0.7% | 1.7% |
| Non-pay period: Biweekly† | 2.7% | 2.8% | 2.5% | 2.2% | 5.2% | 1.7% |
| Per pay period | 76.6% | 74.7% | 76.3% | 76.6% | 77.9% | 83.3% |
| Other | 0.9% | 1.2% | 0.8% | 0.7% | 0.7% | 0.4% |
Source: 2019 PLANSPONSOR Defined Contribution Plan Benchmarking Report