Study: Doubling Employer Match Raises Contribs By 25%

June 30, 2003 ( - A new study by two Syracuse University researchers has found a significant link between the size of an employer retirement plan match and participant contributions.

According to Understanding The Impact of Employer Matching on 401(k) Savings, beefing up a match from 50% to 100% effectively brings up 401(k) employee contributions by 25%.

The study, authored by Gary Engelhardt and Anil Kumar and published by the TIAA-CREF Institute, found that in the statistical sample studied, the average participant contribution in plans with a match was $1,640 with a typical match being 50% on the dollar.  If the employer doubled the match from 50% to 100%, worker contributions would go to $2,050, the study said.

“These estimates are significantly larger than those from previous research and suggest that employee contributions are quite responsive to matching,” Engelhardt and Kumar wrote.

Engelhardt and Kumar relied on data from the Health and Retirement Study, a sampling of 51 to 61 year olds and spouses taken in 1992. The researchers admit their data sample is heavily skewed towards older workers (more likely to have a DB rather than a DC plan, more likely to be unionized, more likely to be in a manufacturing job, etc.).

Among the policy implications from the study, the researchers said, is:

  • the effect of a potential federal government match on voluntary private accounts where taxpayers choose to contribute additional funds to Social Security – as has been proposed
  • the impact on contribution levels of corporate decisions to drop a match entirely.   “A number of prominent companies have reduced or eliminated matching contributions recently due to declining profits,” Engelhardt and Kumar wrote. “Although it remains to be seen if this is a long-term trend, understanding the impact of matching is critical to understanding the impact of these changes on retirement income security for a workforce increasingly dependent on 401(k) plans for retirement.” (See   Suspension Bridge,     SURVEY SAYS: What’s the Status of Your Company Match? ).

The study is available at .