Matching Contribution Law Law and Legal Definition
Matching contribution refers to the amount, if any, that a company contributes to its employees' retirement accounts, which is usually in proportion to each employee's contribution. It may be contributions that are made to an employee''s 401(k) plan by their employer. The amount of the contribution usually matches the employee contribution to a pre-set dollar or percentage maximum. Generally, the employer's contribution may match the employee's elective deferral contribution up to a certain dollar amount or percentage of compensation.
For example, popular matching rates are 25 cents per dollar up to your savings rate of 6% of salary or 50 cents per dollar up to your savings rate of 4% of salary. Sometimes the employer match is discretionary, and the company decides from year-to-year how much to match.