What Is the Average Employer 401(k) Contribution?

Saving for retirement is easier when your employer contributes to your 401(k) plan. Many companies offer matching contributions, which can significantly boost your savings. However, the amount employers contribute varies based on company policies, industry norms, and federal regulations.

Typical Employer Match Rates

Most companies with a 401(k) plan provide matching contributions, but the percentage varies. A common structure is a dollar-for-dollar match on the first 3% to 6% of an employee’s salary. For example, if an employee earning $60,000 per year contributes 5% of their salary, an employer offering a 100% match up to 5% would contribute an additional $3,000 annually.

Some employers use a tiered approach, such as matching 100% of the first 3% of salary and 50% of the next 2%. Under this structure, an employee contributing 5% of their salary would receive a total employer match of 4%—3% from the full match and 1% from the partial match. This method encourages higher employee contributions while limiting employer costs.

The IRS sets an annual limit on total 401(k) contributions, which includes both employee deferrals and employer contributions. For 2024, this combined limit is $69,000, or $76,500 for those aged 50 and older due to catch-up contributions. While most employees won’t reach this cap, high earners with generous employer matches may need to monitor their contributions.

Differences Across Industries

Employer 401(k) contributions vary widely by industry. Large technology firms often provide high matching percentages or even non-matching contributions as part of their compensation packages. Companies like Google and Microsoft have historically matched 50% of employee contributions up to the IRS limit, significantly increasing retirement savings for employees who maximize their contributions.

Healthcare organizations, particularly hospitals and large medical groups, also tend to offer competitive 401(k) contributions. Physicians and nurses working for major healthcare networks may receive employer matches that exceed typical corporate rates. Some nonprofit hospitals even provide automatic contributions regardless of employee deferrals, a structure more commonly seen in government or academic institutions.

Retail and hospitality sectors generally provide lower employer contributions, if they offer them at all. Many businesses in these industries operate on thin profit margins, making generous retirement benefits less feasible. Large chains like Walmart and Starbucks do offer 401(k) matches, but the percentage is often lower than in finance or tech. Employees in these sectors may need to rely more on personal savings.

Employer Contribution Caps

Employers must navigate regulatory limits on 401(k) contributions to ensure plans remain fair across income levels. The IRS imposes annual limits on total contributions, which include both employee deferrals and employer contributions. For 2024, the total contribution limit is $69,000, or $76,500 for employees aged 50 and older due to catch-up contributions.

Beyond overall contribution limits, non-discrimination testing ensures that matching contributions do not disproportionately favor high earners. The Actual Contribution Percentage (ACP) test compares the contribution rates of highly compensated employees (HCEs) to non-highly compensated employees (NHCEs). If a plan fails this test, employers may need to adjust contributions, refund excess amounts, or make additional contributions to lower-paid workers.

Some companies also impose their own limits based on budget constraints. While federal regulations set the maximum allowable contribution, employers may cap their match at a lower percentage. For example, a company might match only up to 4% of salary, even if an employee contributes more. Employees should review their plan documents to understand any company-specific restrictions.

Vesting Considerations

The ability to retain employer contributions in a 401(k) depends on the vesting schedule, which determines when employees gain full ownership of these funds. While employee contributions are always 100% vested, employer contributions often follow a schedule designed to encourage long-term retention.

Companies may use cliff vesting, where employees receive nothing until a set period—commonly three years—or graded vesting, which gradually increases ownership over time, such as 20% per year over five years.

Vesting schedules impact employees who leave before becoming fully vested. For example, an employee who departs after two years at a company with a three-year cliff vesting schedule forfeits all employer contributions. Under a graded schedule of 20% per year, the same employee would retain 40% of the employer’s contributions if they leave after two years. Understanding the vesting policy is important, particularly for those considering job changes.

Highly Compensated Employees

Employees with higher salaries may face additional restrictions on 401(k) contributions due to IRS regulations designed to prevent plans from disproportionately benefiting top earners. The IRS defines a highly compensated employee (HCE) as anyone who earned more than $155,000 in 2024 or owns more than 5% of the company, regardless of salary.

Non-discrimination tests, such as the Actual Deferral Percentage (ADP) test, compare the contribution rates of HCEs to NHCEs. If lower-paid employees contribute at lower rates, HCEs may be restricted in how much they can defer. For example, if NHCEs contribute an average of 5% of their salaries, HCEs may be limited to contributing only 7% to 8%, even if they intended to contribute the full IRS limit of $23,000 for 2024.

Employers sometimes offer safe harbor 401(k) plans to bypass these restrictions. These plans require mandatory employer contributions for all employees, ensuring HCEs can contribute freely without being subject to testing limits.