An employer 401(k) match is part of your pay. If you don’t contribute enough to get it, you’re leaving compensation unclaimed.
How matching formulas work
Plans set their own formula. Common types:
- Dollar-for-dollar up to a cap: for example, 100% of what you contribute, up to 4% of salary.
- Partial match: for example, 50 cents per dollar up to 6% of salary. You would need to contribute 6% to get the full 3%.
- Non-elective contributions: the employer puts in a set percentage whether you contribute or not.
Your plan’s Summary Plan Description has the exact formula. Read that rather than guessing.
Vesting
Your own contributions are always 100% yours. Employer contributions may “vest” over time, so if you leave early you could forfeit part of the match. The IRS describes the allowed schedules, such as cliff and graded vesting, in IRS: vesting schedules for matching contributions. Check your vested balance before you change jobs. Waiting a few weeks to pass a vesting date can be worth real money.
Contribution limits
The IRS sets annual limits on how much you can defer, with higher catch-up amounts for workers 50 and older. The current numbers are on the IRS 401(k) contribution limits page. Most people hit the match long before the limit.
Using the match in negotiations
- Compare offers on total compensation. A 6% match on an $80,000 salary is $4,800 a year that a “higher” offer with no match may not cover.
- Ask whether the match is paid every paycheck or once a year. Some plans require you to be employed at year-end to receive it.
- Ask about the vesting schedule before you accept.
Related: reading your pay stub ยท countering a job offer
General information, not financial or tax advice.