Many plans choose to provide a matching program for the participants in their 401(k). Employers can match a certain amount for each dollar a participant contributes up to a specified percentage threshold (i.e. $0.50 on the dollar up to 6%). Matching contributions are allocated based on participants’ actual deferrals for the pay period or year, though the participant may withhold more of their income than the employer is willing to match.
For example, Jane at Better Benefits Company chooses to contribute 9% of her $100,000 salary to her 401(k) plan. Better Benefits Company matches $.50 on the dollar up to 6%. Jane’s annual contribution to her 401(k) will be $9,000, and Better Benefits Company will match with $3,000.
