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February 23, 2009

Employer matching contribution (or matching contribution)

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Definition

Contributions made by the employer in addition to & contingent upon salary-deferral contributions made by the participant.

Matching contributions can be made to 401(k) plans-including SIMPLE 401(k) plans, SIMPLE IRAs and 403(b) plans.

Matching contributions are usually based on a percentage of the participant’s compensation.

Examples of matching contributions include the following

$1-for-$1 up to 3% of compensation
Translation , the employer will contribute $1 for every $1 the employee puts in as a salary deferral contribution. However, the amount the employer puts in will not exceed 3% of the employee’s compensation

$0.50 on every dollar, up to 6% of compensation
Translation , the employer will contribute $0.50 for every $1 the employee puts in as a salary deferral contribution, however, the amount the employer outs in will not exceed 6% of the of the employee’s compensation

Referring Cite

IRC § 401(k), IRC § 408(p), IRC §  403(b) , The governing plan document

Additional Helpful Information

  • Employees are encouraged to make as much salary deferral contribution as is necessary to receive the maximum matching contribution the employer will make
  • Matching contributions under a SIMPLE IRA are not subject to the compensation cap

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

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