An employer contribution to an employee\'s 401(k) account based on the employee\'s own deferrals. Employer matches are not subject to FICA when contributed but are taxable to the employee when distributed in retirement.
Why 401(k) Employer Match matters for employers
The most common match formula is 50% of employee deferrals up to 6% of compensation, effectively contributing 3% of compensation for employees who defer at least 6%. Safe harbor 401(k) plans require either a 100% match on the first 3% of deferrals plus 50% match on the next 2%, or a flat 3% non-elective contribution to all eligible employees, in exchange for exemption from certain nondiscrimination testing requirements.
Employer matches vest according to a schedule set in the plan document -- either immediate vesting, cliff vesting (100% after a set number of years), or graded vesting (phased percentages over multiple years). Forfeited unvested employer contributions when employees leave can be used to offset future employer contributions or pay plan expenses.
How BEG handles 401(k) Employer Match for clients
BEG Managed Payroll handles 401(k) Employer Match as part of a fully managed payroll service at $25-$45 per employee per month. Clients do not need to track compliance rules, filing deadlines, or calculation methods related to 401(k) Employer Match on their own. Everything is included. Learn about BEG Managed Payroll.
Frequently asked questions
Do employers have to manage 401(k) Employer Match themselves?
No. A managed payroll provider handles 401(k) Employer Match as part of full-service payroll. BEG manages this for clients at $25-$45 PEPM with no system migration required.
What happens if 401(k) Employer Match is handled incorrectly?
Errors related to 401(k) Employer Match can trigger IRS penalties, state agency assessments, or employee disputes. Catching and correcting errors before filing is far less costly than after-the-fact corrections.
How does BEG handle 401(k) Employer Match for managed payroll clients?
BEG tracks, calculates, and remits everything related to 401(k) Employer Match as part of fully managed payroll. Clients do not need to monitor compliance -- that is included in the service at $25-$45 PEPM.
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About the author
Anthony Moretti is VP of Sales at Business Executive Group, where he builds BEG's managed payroll and HR service verticals for employers across Dallas-Fort Worth and nationwide. He writes the BEG Payroll Glossary to give employers plain-English answers on payroll and compliance.
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