Question regarding Employer’s 401K Match

Submitted by Steve Hagedorn on Tue, 2019-10-01 16:35

I soon will have a yearly review with my employer who offers a 401K plan in which I participate. My employer presently does not match employee contributions and I would like to advocate for myself as a form of negotiating my “raise” during this yearly review.

My understanding is the employer can deduct their employ match (within limits) from their federal tax return making it advantageous to offer to employees.

My thought is this deductible match might be larger than any taxable raise I could ask for.

How might one advocate for the company to offer an employer match and is anyone aware of what the tax deductible limits are for the employer?

Thanks,



Submitted by William Tuttle on Wed, 2019-10-02 13:38

  • In the first paragraph, you talk about advocating for “yourself”. Employer contributions must be non-discriminatory. They must meet IRS general availability requirements for all employees.
  • Yes, employer deductions in accordance with the tax code and IRS regulations are deductible. An employer could give a higher employer contribution than a raise.
  • Any advocacy should be couched in benefits to the employer and only indirectly to the employees. Wages are also a deduction. Telling the employer that giving everyone a 5% bonus will only cost him a net 4% is not a winning argument.
  • Instead suggest things like; the company’s ability to attract and retain talent is adversely affected by having no match, failing to have a safe harbor plan is even worse for top talent. Assuming the plan fails ADP testing, which is highly likely with no match.
  • The deduction limit is not likely a limiting factor. The company’s employer contributions can not exceed 25% of the employer’s total compensation paid.

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