There is a formula that will be spelled out in a Summary Plan Description or in an annual notice to you.

  1. Under all circumstances, a matching contribution will only be made if you have deferred money into the plan. Don’t miss out on this important benefit by failing to contribute to your 401(k).
  2. Some plans will not offer a matching contribution. It still makes great sense to defer, however. You may be forgoing tax savings for the contribution and tax-deferred accumulation. And how else are you going to save money for retirement.
  3. Some plans state that contributions are “discretionary” meaning that the Employer could decide later it cannot afford to make a matching contribution—even if you contributed.
  4. Some plans require that you meet certain conditions to receive a match. For example, you must be employed on the last day of the plan year; or you must have worked a certain number of hours during the plan year.
  5. Some plans are “safe harbor” plans. Instead of making a matching contribution, the employer will make a “profit sharing” contribution for eligible employees even if they do not defer into the 401(k).
  1. A “safe harbor” 401(k) plan allows an employer to skip certain testing requirements that might otherwise constrain certain employees from being able to defer the maximum dollar amounts. To secure this relief, the plan must either:
    • Match deferrals with a formula as favorable as dollar-for-dollar on the first 3% of compensation deferred and fifty-cents on the dollar for the next 2% of compensation deferred (in total a 4% match); or
    • Contribute at least 3% of compensation to every eligible employee whether they defer or not.
  2. Safe harbor contributions cannot have “allocation conditions”, e.g., last day of the year employment, or hours of service, in order to receive an employer contribution
  3. You are fully vested in safe Harbour contributions with the exception of “additional, discretionary” safe-harbor contributions.