Average Company 401(k) Match in 2017: A Comprehensive Analysis
The 401(k) match has long been a staple in employee compensation packages, with companies contributing to their employees' retirement savings. In 2017, the average company 401(k) match provided valuable insights into employer contributions and employee participation. This article delves into the details of the average 401(k) match in 2017, its impact on employees, and the trends that emerged.
Understanding the 401(k) Match
Before exploring the 2017 data, it's essential to understand the 401(k) match. A 401(k) match is an employer contribution to an employee's 401(k) account, typically a percentage of the employee's contribution. This match is usually discretionary, meaning employers can change or eliminate it at any time. However, many companies use it as an incentive to encourage employees to save for retirement.
Types of 401(k) Matches
- Dollar-for-dollar match: The employer contributes an amount equal to the employee's contribution, up to a certain percentage of the employee's salary.
- Percentage match: The employer contributes a fixed percentage of the employee's contribution, regardless of the employee's salary.
- Nonelective contribution: The employer contributes a fixed amount, regardless of the employee's contribution.
Average Company 401(k) Match in 2017
In 2017, the average company 401(k) match was 3.5% of an employee's salary, according to a study by the Employee Benefit Research Institute (EBRI). This was a slight increase from the 3.25% average in 2016. However, the average match varied significantly by company size and industry.
Average 401(k) Match by Company Size
| Company Size | Average 401(k) Match (%) |
|---|---|
| Small (less than 100 employees) | 2.7% |
| Medium (100-499 employees) | 3.2% |
| Large (500 or more employees) | 4.0% |
As shown in the table, larger companies tended to offer more generous 401(k) matches than smaller companies.
Average 401(k) Match by Industry
- Education: 6.2%
- Healthcare: 5.5%
- Finance and Insurance: 4.8%
- Manufacturing: 4.2%
- Retail Trade: 2.8%
The industries with the highest average 401(k) matches were education and healthcare, while retail trade had the lowest.
The Impact of the 401(k) Match on Employee Participation
The 401(k) match plays a significant role in encouraging employees to participate in their company's retirement plan. According to a study by the Vanguard Center for Retirement Research, employees were 12 times more likely to save for retirement if their employer offered a match. Moreover, the higher the match, the more likely employees were to save and save more.
Trends in 401(k) Matches
While the average 401(k) match increased slightly in 2017, the trend over the past decade has been relatively flat. However, there has been a shift in the type of match offered. In recent years, there has been an increase in nonelective contributions, which do not require employees to contribute to their 401(k) to receive the employer's contribution. This trend may reflect employers' efforts to encourage retirement savings among lower-income employees, who may not be able to afford to contribute to their 401(k).
Furthermore, there has been a trend towards automatic enrollment in 401(k) plans, which can increase employee participation. In 2017, 62% of 401(k) plans offered automatic enrollment, up from 54% in 2010.
Conclusion
The average company 401(k) match in 2017 provided valuable insights into employer contributions and employee participation in retirement plans. While the average match increased slightly in 2017, the trend over the past decade has been relatively flat. However, there have been shifts in the type of match offered and an increase in automatic enrollment, which can encourage retirement savings among employees. Understanding these trends can help employees make informed decisions about their retirement savings and employers design effective retirement benefit packages.
