Over Eight in 10 Employers with a Traditional 401(k) Plan Provide Matching Funds, Finds XpertHR’s 2021 Survey on Employee Benefits

While employers often provide matching contributions to their traditional 401(k) plan, they typically delay fully vesting their employees in those matching funds, according to XpertHR’s 2021 Employee Benefits Survey of 452 US employers.

The survey covered over 10 retirement plans and found that traditional 401(k) plans are the most popular, with 60% of responding organizations offering this type of plan to all or most of their workforce, followed by Roth 401(k) plans (43%). (Respondents could choose more than one plan.)

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Among the 271 surveyed employers that offer a traditional 401(k) plan, 82% match at least some portion of employee contributions to the plan, compared with 18% that provide no matching funds. And, among the 222 responding companies that do provide matching funds, 28% fully vest their employees in these funds immediately, while most require a waiting period.

These waiting periods vary widely, and respondents noted several timeframes: up to one year (13%), up to two years (7%), up to three years (14%), up to four years (6%), up to five years (17%), up to six years (10%), and more than six years (1%). (Five percent were not sure). (The IRS requires matching funds to 401(k)s to be fully vested at least by six years of service.)

“The survey shows that while employers often provide matching funds for their traditional 401(k) plans, most require wait times – sometimes up to several years – for employees to become fully vested in those employer contributions,” notes Andrew Hellwege, Surveys Editor, XpertHR.

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The survey also covered a variety of topics in the health care and insurance space, including whether employers fully insure or self-insure the health care plan(s) they offer to their workers, and found that smaller organizations are more likely to fully insure.

Eighty-two percent of organizations with fewer than 250 workers fully insure their health care insurance plan(s), compared with 45% of companies with 250 to 999 employees, and 21% of employers with a staff of 1,000 or more. Conversely, 11% of small organizations self-insure their plan(s), compared with 50% of mid-size companies, and 55% of large employers.

“The survey shows that workforce size is clearly a factor when organizations are determining whether to fully insure or self-insure their health care plans,” notes Hellwege, “as small companies are about four times more likely to fully insure than large employers.”

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