Corporate matches to 401(k) plans increase participation rates, according to a survey by Charles Schwab.
The survey of plan participants found that overall participation increases to 76% when a match was offered compared to a 70% participation rate when the match wasn’t offered, confirmed Eric Hazard, a spokesman for Schwab.
Also, 69% of respondents cited the employer match as the reason why they enrolled in a 401(k) plan, according to a Schwab news release. Twenty-five percent of respondents “chose not to enroll in their company 401(k) plan because their employer does not offer a high enough match,” the news release said. No match amount was specified.
The news release also said that a review of records of 755,000 Schwab clients at 911 plans showed that 73% of 401(k) plans offer matching contributions.
Schwab said there is a connection between how a company structures its match and at what level employees contribute. “Plan participants are likely to choose the plan’s ‘match ceiling’ as their savings deferral level in order to maximize the employer contributions they can receive,” the news release said. “Up to 25% of participants save at the employer match ceiling, depending on an employer’s match formula. By raising the ceiling, employers can boost savings rates.”
The survey of 1,005 consumers who are employed full time or part time and participate in their company’s 401(k) plan was conducted in June. The survey included participants in plans whose sponsors are Schwab clients as well as participants in plans whose sponsors aren’t Schwab clients.