Using Matching Contributions to Increase 401k Participation

How Do I Use Matching Contributions to Encourage My Employees to Participate in the 401k Program? – James W. Medlock, San Diego, CA

The best thing about 401ks is the fact that other than the contribution made by the employee for his future saving, he gets a little extra in the form of employer contributions. Advertising this fact to your employees can interest them into voluntarily making their own contributions to your small business 401k plan. After all, your employer contribution is based on what the employee contributes from his or her own salary.

Typically, most employers specify the percentage of the employee contribution that will be deposited into the 401k plan as matching contribution from the business. Some employers also opt to have a profit sharing contribution in addition to this. If you want to encourage employees who show promise or who put in extra effort for your business, a profit sharing contribution is a great way to do it. This is because this kind of matching contribution lets you use your discretion in rewarding employees. Many small businesses use this as a means to improve productivity and motivate promising employees to excel.

If you are hesitant to add a profit sharing feature to your 401k because this will give rise to complexities in managing the contributions made by you and your employee, you can leave these worries behind. All you have to do is choose a ready to deploy 401k management package like the one offered by With this package you can set up the plan quickly and also administer it by spending just a few minutes a month.

About Elliot Earl, Director, Pension Trade Association
Director, Pension Trade Association Founded in 1982, the Pension Trade Association [California Domestic Nonprofit Corporation #C1629080] is dedicated to helping workers save for their retirement through expanded coverage of 401k -type defined contribution pension plans.

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