An employer’s potential additional payment to an employee’s 401(k) plan contingent on the extent of an employee’s participation in the plan.
Example: A popular employer matching program is “50% of the first 6%.” This means that for every dollar an employee contributes to the 401(k) plan, the employer adds 50 cents. Once the employee reaches contributions equaling 6% of gross pay, employer contributions cease until the following year.
Note, however, that if the employee does not contribute at least 6% of salary to the 401(k) plan, the worker forfeits additional compensation from the employer.
Not every 401(k) plan has an employer matching program.