What’s the Most Common Match?

The most common DC match turns out to not be the one that participants were more likely to get, according to a new report.

Altogether, the most common match rates for employee contributions (with various limits on the maximum employee contribution matched) were 50% and 100%, both used by about 37% of plans, while the most common percentage of employee contributions matched (with a variety of limits on the percentage of the contribution matched) was 6%, used by 34.3% of plans.

Most Likely

However, according to “The BrightScope/ICI Defined Contribution Plan Profile: A Close Look at 401(k) Plans, 2014,” participants were more likely to be in plans matching employee contributions up to 6% of salary. For example, 15.6% of participants in plans with simple matching formulas were in plans that matched 50% of contributions up to 6% of salary, while 32.7% were in plans that matched 100% of contributions up to 6% of salary. Overall, more than half (55%) of participants were in plans matching 100% of employee contributions (albeit with a variety of limits on the percentage of the contribution matched), and 56.2% were in plans matching employee contributions up to 6% of salary (with a variety of limits on the percentage of the contribution matched).

The report notes that in 2014, more than 90% of 401(k) plans with more than $10 million in plan assets had employer contributions, compared with nearly 7 in 10 401(k) plans with less than $1 million – a pattern that also held true when participant counts were considered.

In 2014, 45% of 401(k) plans in the BrightScope database had a simple match formula, 14% had a tiered match formula, and 2% of 401(k) plans matched employee contributions up to a maximum dollar amount. A quarter of 401(k) plans contributed money to the plan without regard to how much the employee contributed, while participants in the remaining 14% of 401(k) plans did not receive any employer contributions in 2014.

Simple match formulas were slightly less common in the smallest plans. While 41% of 401(k) plans with $1 million to $10 million in plan assets offered a simple match, about 50% of plans with more than $10 million in plan assets did so. As in the Form 5500 401(k) universe, the smallest plans in the BrightScope database were significantly less likely to have employer contributions: 20% of plans with $1 million to $10 million in plan assets offered no employer contribution in 2014. This fell to less than 5% of plans with more than $100 million in plan assets.

Most Common Formulas

Among the 45% of 401(k) plans with simple match formulas in the BrightScope database, the most common formulas were:

  • a 50% match of contributions up to 6% of employee salary (18.1%); and
  • a 100% match of contributions up to 4% of employee salary (10.6%).

The most common combination of contribution eligibility and vesting for plans with employer contributions was for employees to receive employer contributions after a year of service, and to be fully vested in those contributions after six years: 20.8% of 401(k) plans in the sample of plans providing this information had this combination, followed closely by plans in which employees were eligible for employer contributions after a year, but were immediately vested in those contributions (18.2% of 401(k) plans in the sample). Overall, employees in nearly a third of 401(k) plans were immediately vested, and nearly 60% of plans made employees eligible for employer contributions after one year.

Automatic Enrollment

Overall, 27% of 401(k) plans with 100 participants or more and at least $1 million in plan assets reported they automatically enrolled participants. Since larger plans are more likely to have automatic enrollment, overall, 38% of 401(k) plan participants in plans with 100 participants or more and at least $1 million in plan assets were in plans with an automatic enrollment feature.

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