It should come as no surprise that most participants contribute to the level of the company match. Generally speaking, that is viewed as a positive result—as a sign that workers understand the mechanics of the match, appreciate its value, and recognize its importance in retirement savings.
Illustration by James Yang
However, a number of industry surveys show that most people contribute to the level of the employer match—and no more. In fact, recent data from the Employee Benefit Research Institute indicate that younger and less-highly paid workers are even more likely to pattern their savings rate on the rate of employer match—a particular concern in times when many employers have had to take a hard look at their matching contributions.
With all the natural emphasis on the “free money” from the company match, some workers may be assuming that the match level is the maximum they can contribute. Or, perhaps they are simply assuming that you have set the match at the “right” level for them to save.
Whatever the reason for the confusion, this month’s Know How reminds participants that they may be able to save more than they are—and hopefully spurs them to reconsider their current savings rate as we head into a new year. We hope you find it useful in communicating with your participants—and, as always, look forward to your feedback.
Nevin E. Adams