401(k) plans in which employers match contributions have contribution rates as much as 9 percentage points higher than those that dont, Fidelity Investments found. And when combined with immediate vesting, contribution rates climb to 11 percentage points higher.
Employers typically match contributions up to 3% of participants salaries.
Many employers, both small and large, are facing tough decisions about employee benefits in this economic environment, said Scott B. David, president of workplace investing at Fidelity. We know that when companies eliminate the match to their workplace savings plans, almost half see a decrease in participation and deferral rates.
This research shows that the very existence of any company match, even a small one, incents employees to participate more in their workplace plans, and those participation rates increase further in plans with more generous match programs, David said.
Fidelity is hoping that the release of this information will convince employers that were thinking about suspending their 401(k) matches to find other ways to trim their budgets, since it is important to keep more workers on the right path in their retirement savings efforts, David said.
Company matches had the biggest impact on participants in their 30s and 40s. For those in their 50s, company matches generally boost contribution rates 7 percentage points. Those in their 60s or their 20s do not seem to be swayed by matches.