Employee Match Contributions Matter

Unlock the 401(k) Match Playbook: Save on Taxes, Win Top Talent

Offering a 401(k) employer match isn’t just a nice-to-have—it’s a strategic advantage. Whether you’re trying to attract top talent, reduce turnover, or lower your tax bill, a well-structured 401(k) match can help you do it all. But how does it actually work, and what should you consider when designing your plan?

What Is a 401(k) Employer Match?

A 401(k) match means you, the employer, contribute to your employees’ retirement accounts based on how much they contribute to their own accounts. Most businesses offer a match between 3% and 6% of an employee’s salary—but there are a few ways to structure it:

Dollar-for-Dollar Match

A dollar-for-dollar match means you match 100% of employee contributions up to a set percentage of their salary. For example, if you offer a 100% match up to 4%, and your employee contributes 4%, you’ll also contribute 4%.

Stretch Match

A stretch match means you match 50% of employee contributions up to a higher percentage—for example, 50% up to 8%. This encourages employees to save more to get the full match, while keeping your costs similar to a 100% match at 4%.

Flat Dollar Match

A flat dollar match means you contribute a fixed dollar amount, like $5,000 per year, regardless of salary. This can be attractive for high earners or as a simple, predictable benefit.

Why It Matters for Your Business

• Tax Benefits: Employer contributions are tax-deductible, reducing your business’s taxable income.
• Talent Magnet: 68% of employers believe employee satisfaction is an important measure of 401(k) success and 67% say a matching contribution is a top design feature for achieving this success¹.
• Retention Booster: Employees who are happy with their retirement plan are more likely to stay long-term.

What’s the Average Match?

The average employer match in 2025is around 4% to 6% of an employee’s total compensation ², and it’s been steadily rising. In competitive industries, companies like Microsoft have even matched up to federal limits to retain top talent.

What’s the Max You Can Match?

For 2025, the total combined contribution limit (employee + employer) is $70,000, or $77,500 for employees over 50. You can match as much as you want within that limit or up to 100% of the employee’s compensation—whichever is less.

Employee Considerations to Keep in Mind

• Contribution Limits: Employees should know their annual contribution limits and how to maximize your match.
• Vesting Schedules: Employer contributions may be subject to vesting. Employee contributions are always 100% theirs, but your match might require a few years of service to fully “own.”
• Forfeiture Rules: If an employee leaves before they’re fully vested, they may forfeit some or all of your contributions.
• Company Stock: If your match is in company stock, encourage employees to diversify. Many advisors recommend keeping no more than 5–10% of retirement assets in company stock.

Communicating 401(k) Match Changes

Whenever you update your 401(k) plan, especially your match, you must update your plan documents and notify employees. The IRS requires a Summary Plan Description (SPD) that outlines:

• The new match rate and effective date
• Enrollment instructions
• Vesting schedules
• Any stretch match details

Your 401(k) advisor can help update these documents and even assist with employee communication through meetings or workshops.

The Ideal 401(k) Match: Go Beyond the Basics

Many employees mistakenly think they should only contribute up to the match rate. If you offer a 6% dollar-for-dollar match, they might stop there. But financial experts suggest saving more—6% early in a career and increasing your savings rate by 1% each year until you reach 15% ³.

Some experts recommend a 50% match up to 12% of salary ⁴. This encourages employees to save more while costing you no more than a 6% match. It’s a smart way to promote financial wellness without increasing your budget.

Final Thoughts

Designing the right 401(k) match is about more than just numbers—it’s about aligning your benefits with your business goals and your team’s future. Whether you’re just getting started or looking to optimize your plan, talk to a Fisher\SMB 401(k) advisor to explore your options. Click here to schedule a consultation.

Your contributions aren’t just a perk—they’re an investment in your people, your culture, and your company’s long-term success.

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