Employer matching can encourage how much money participants invest in their 401(k) retirement accounts, even when the employer's total contribution remains the same, finds a new Principal Financial Group analysis.
"The data tells us that while the employer contribution stays at 2 percent, the higher target deferral in the match formula is spurring participants to save more," says Barrie Christman, vice president of individual investor services at The Principal. "This is significant because it shows that employers can incent better savings behavior without having to increase their costs."
According to the analysis, changing the matching contribution to a higher level also does not discourage participation. In a sample group of contributing participants who have an employer match, 43 percent of those participants contribute 6-10 percent while 26 percent contribute 11-15 percent.
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