Jamie Ann Hayes, QPFC, C(k)P, AIF(r)

Jamie Ann Hayes, QPFC, C(k)P, AIF(r), Partner and Consultant of FiduciaryFirst, specializes in Employer Retirement Plan Fiduciary Services and Corporate Pension Consulting.

The Benefits of Matching Contributions

A survey recently released by Aon Hewitt showed that 19 percent of employers are now matching all their employees’ 401(k) plan contributions up to 6 percent of salary. That’s a significant increase from 2011, when 10 percent of employers provided that level of matching, and from 2001, when only 4 percent of employers offered that level of 401(k) matching.

Employers are obligated to provide matching contributions, but clearly, more and more are doing so. What are the benefits to plan sponsors of providing matching contributions to plan participants?

  • Improved recruiting and greater retention. Offering a retirement plan such as 401(k) has become a critical element of employee compensation, as more potential hires become concerned about saving for retirement. Matching contributions gives your plan an additional “edge” when a prospective employee is comparing it to those offered by other companies, and also helps retain current employees who might not find similar matching contributions at other jobs.

  • Increased plan participation. An employer contribution matching program provides employees with a strong motivator to enroll in a 401(k) plan, to make contributions, and to increase contribution levels.

  • Employee incentives. A plan sponsor can carefully structure a matching contribution program to specific company goals, such as profitability. That means employees get more by contributing to the company’s bottom line.

  • Tax advantages. Employer contributions to a 401(k) plan, like matches and profit-sharing, are tax-deductible. In addition, all administrative expenses associated with the plan, including educational materials and programs, are tax deductible.

  • Management may also benefit. In some instances, by offering a 401(k) plan to employees, an owner/employer can also improve his or her readiness for retirement. An owner may be considered a highly compensated employee, which could allow him or her to save up to the IRS maximum in the plan ($51,500 in 2013, with an additional $5,500 for “catch-up” contributions for highly compensated employees who are 50 or older).

If you would like to review retirement plan options for your company, FiduciaryFirst can provide you with the objective financial guidance and retirement plan consulting you need. We’ll help you structure a plan that meets your goals and objectives. Call us today at 407-740-6111 or visit fiduciaryfirst.com to learn more about the services we provide to retirement plan sponsors, including for-profit and non-profit corporations, government agencies, and other organizations.

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