Safe Harbor Guide
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Employer Matching
Turbo charge your employees retirement savings by adding an employer matching feature to your company’s 401(k).
What is Employer Matching?
Employer match is a common 401(k) feature that enables the employer to contribute to an employee’s retirement.
How it works
There are three common types of employer match: dollar-for-dollar, stretch, and dollar amount.
Why offer it?
It incentivizes employees to save for retirement and helps employers create a competitive benefits package.
How Fisher can help
There are many options when it comes to employer matching programs. Fisher helps business owners tailor their matching strategy to their individual needs.
Safe Harbor Guide
Learn how businesses utilize a Safe Harbor employer matching feature to pass compliance testing and help employees save more for retirement.
There are four primary ways to implement a 401(k) employer match:
Dollar for Dollar Match
An employer will match employee contributions dollar-for-dollar up to a certain percentage of the employee’s total compensation. For example, a 100% match of up to 3% of an employee’s compensation.
Stretch
Match
An employer matches 50% of employee contributions up to a certain percentage of the employee’s total compensation. For example, 50% match up to 8% of an employee’s compensation, for a total match of 4% of the employee’s salary.
Dollar Amount Match
An employer matches a set dollar amount to each employee. For example, an employer matches the first $5,000 of an employee’s contribution to the plan.
Safe Harbor Match
An employer uses one of three Safe Harbor strategies to automatically pass compliance testing: a non-elective contribution, a basic Safe Harbor match, and an enhanced Safe Harbor match.
Compliance Testing
All 401(k) plans must pass annual non-discrimination testing, which is designed to ensure that Highly Compensated Employees (HCEs) don’t benefit significantly more than Non-Highly Compensated Employees (Non-HCEs).
Corrective Distributions
If an employer’s plan fails non-discrimination testing, the plan is considered ‘top-heavy’ and contributions made by (HCEs) are paid back through corrective distributions.
Safe Harbor Plans
Many employers choose a Safe Harbor match because it allows the plan to pass non-discrimination testing and enables all employees, including HCEs, to contribute up to the 2025 IRS maximum of $23,500 (under age 50) /$31,000 (over age 50).
Eligibility and Vesting Schedules
Because matching can be costly, many employers use eligibility restrictions and vesting schedules to strategically manage costs by incentivizing desired employee behaviors.
Safe Harbor Contribution Chart
Compare different Safe Harbor options to help your plan automatically pass compliance testing.
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One of our 401(k) business specialists would love to talk to you about your company’s retirement plan needs.
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