Designing the Best Match

April 24, 2012 ( - Company match contributions are beneficial for retirement plan participants, but they can also provide benefits for sponsors, including employee attraction and retention.

A white paper from Arnerich Massena called “Making The Most Of Your Match” explores the use and construction of matching programs based on current industry trends and research. It outlines how a match affects participation, contribution rates, employee satisfaction and retirement outcomes.  It also explains the key elements to consider when structuring an employer matching program, including safe harbors, automatic enrollment and providing compensation in a deferred form for maximum tax advantage. 

Jacob O’Shaughnessy, CFA, investment adviser for the institutional practice at Arnerich Massena, told PLANSPONSOR that for most plan sponsors, the main objective in offering an employer match contribution is providing better outcomes for employees, but it can have additional benefits like employee attraction and retention, and aligning the interests of the firm with the mechanics of the match. For example, O’Shaughnessy says, if a plan sponsor wants long-term employees, it should have a vesting schedule on the match deliberately designed to encourage more years of service.  

Designing the best match not only includes considerations of the best formula, but the vesting schedule and cost to the sponsor. An example of managing costs is when a plan sponsor wants to increase employee deferrals, instead of matching 100% of the first 3% of salary deferred, it would match 50% of the first 6% of salary deferred. The money contributed will not change for the plan sponsor, but the match design will result in new participant outcomes, O’Shaughnessy points out.  

In another example, he says if a plan sponsor wants to increase participation, it should offer a generous match and immediate vesting.

Plan sponsors should make sure the objectives of the match are aligned with higher corporate objectives, according to O’Shaughnessy.  

“If employees have multiple job offers, they do look at benefits. As the marketplace for employees heats up, we feel there will be more attention to the company match as an attraction and retention tool,” he says.  

The white paper can be downloaded from