Redesigning Your Match
How do you get employees to contribute more to your retirement savings plan? Consider redesigning your employer match. Spreading the company match over a larger portion of employees’ contributions may boost participant contribution rates.
Making the Most of the Match
For some employees, the employer match is one of the main reasons they participate in their employer’s retirement savings plan. They make sure they contribute enough to take full advantage of the match since it’s “free” money. By redesigning the match formula, you may be able to encourage your employees to increase the amount they contribute to the plan.
A New Formula
Raising the threshold for your employer matching contribution could increase employee contributions at no extra cost to your company. For example, suppose your current formula is a 100% match on the first 3% of compensation. You redesign your match formula so that you offer a 50% match on the first 6% of compensation. Employees now have to contribute 6% of their income to receive the full match, potentially increasing participant contributions without increasing your overall matching contribution amount.
Opportunity To Educate
Redesigning your match also can be an opportunity to better educate your employees on the benefits of increasing their contribution rate. Review your communication materials to make sure they encourage employees to contribute more to the plan and to take full advantage of the employer match.