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Getting Creative with Your Company Match

Offering employees a company match can carry a wide array of benefits including increased recruitment, higher savings rates, better participation, and more dollars available to put away pre-tax for you as an employer.


Many employers overlook the opportunity that a company match can provide. By matching 25 cents, 50 cents, 75 cents or dollar for dollar, typically a plan sponsor can directly impact savings rates towards the target rate. What is often overlooked is the opportunity to stagger matching contributions to nudge employees towards a healthier savings rate.


While matching 100% of the first 5% of pay is a beautiful benefit, you are likely to see a number of employees that elect to stop contributing once they get to 5%. What if instead, you used those same total dollars but moved the match to 50% of the first 10%. It costs you, as the plan sponsor, the same total dollars but has immediately incentivized your staff to save more for their own retirement.


If you are looking to get even more creative, consider an escalating match that grows as the contribution rates grow. Maybe you are contributing a 5% match on the first 4% of pay, but then matching 100% on the next 4%. Again, the same cost to you, but the decision employees make is sloped in the direction of healthy retirement savings rates.




Many people would agree that saving 10% of your pay is much more difficult than saving 3% The trouble is that many company match formulas offer a greater marginal incentive at easier low rates than at higher, more difficult savings rates. By shifting the amount of “skin in the game” that your employees need to have for their own retirement, you nudge them towards a savings rate that is more likely to fund a sustainable retirement for them.


Will employees push back on the changes? Are changes like this seen as moving the carrot? In our experience, proactive communication and education with a paternalistic attitude solves many objections before being raised.