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February 16, 2009

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
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