03 / PLAN FORMULA
Read the match
in two parts.
A match formula answers two different questions: how much the employer matches per employee dollar, and how much of your pay or deferral the plan counts. The exact formula comes from your plan—not from a general handbook.
At $60,000 of eligible annual pay, 6% is $3,600. If at least $3,600 is contributed in eligible employee deferrals, a 50% match on that portion would be $1,800 for the year, before any plan-specific timing, eligibility, or vesting conditions.
Match rate is not the salary cap
Match rate is the fraction the employer contributes on an eligible employee deferral. Salary cap is the maximum share of eligible pay that can be considered. For example, “100% on the first 4%” would produce an illustrative maximum match of 4% of eligible pay when the employee defers at least 4%. “50% on the first 6%” would produce at most 3% of eligible pay under that simplified formula. The exact plan formula may use tiers or other terms.
Timing can change the paycheck-by-paycheck result
Some plans calculate matching contributions each payroll period. If so, a participant who reaches an annual deferral limit early in the year may stop contributing for later pay periods and miss later matches unless the plan has a year-end true-up. Other plans may use a different calculation schedule. Ask whether the match is calculated each paycheck, on annual compensation, or with an adjustment after year end. Do not assume a true-up exists.
Eligible compensation may not equal gross pay
A plan can define compensation for matching purposes. It may include or exclude items such as bonuses, commissions, overtime, or certain one-time payments. It can also use an entry date or eligibility period. The calculator on this site deliberately uses one flat annual eligible-pay figure; it cannot reproduce your payroll system or plan definition.
Vesting is a separate question
Vesting means when an employer contribution becomes nonforfeitable under plan rules. Your own salary deferrals are generally immediately vested; some employer contributions may vest over time. Review the SPD for the schedule and service rules. If you are comparing a current balance with what you could keep after leaving, distinguish the vested balance from the total account balance.
A short plan-document checklist
- What formula and tiers apply to my employee deferral?
- Which compensation does the formula count?
- Is matching calculated per paycheck or over the full year?
- What happens if I change jobs, take leave, or reach the annual deferral limit midyear?
- Does the plan provide a true-up, and when is it credited?
- What vesting schedule applies to each employer-contribution source?
The U.S. Department of Labor explains that the SPD describes plan operation and vesting. See DOL plan information and DOL participant guidance on plan fees.