Employer Match Rate
This is the amount of the employees’ contribution that the employer matches. This amount is typically expressed as a percentage or in terms of “cents on the dollar”.
The employer's Employer Match Rate is 50% and the Employer Maximum is 6% for the following examples:
- Example 1: An employee contributes 4% of their $1000 per pay period salary. The employee contributes $40. The employer would contribute 50% of the employee's contribution, therefore the employer would contribute $20.
- Example 2: An employee contributes a flat rate amount of $80 per pay period. The employee's gross earnings for that period is $1000, so the employee has contributed 8% of their gross earnings. The Employer Maximum is 6% so the employer will match no more than 6% of the employee's gross earnings at a rate of 50%. Six percent of the employee's gross earnings is $60 and 50% of $60 is $30, so the employer's contribution is $30.
Employer Maximum
This is the maximum amount of an employee's gross earnings that an employer will match. For all retirement plans this amount can be expressed as a percentage (%). For some retirement plans this amount can also be expressed as a dollar amount ($).
The employer's Employer Match Rate is 100% and the Employer Maximum is 4% for the following examples:
- Example 1: An employee contributes 4% of their $1000 per pay period salary. The employee contributes $40. The employer would contribute 100% of the employee's contribution, therefore the employer would also contribute $40.
- Example 2: An employee contributes a flat rate amount of $80 per pay period. The employee's gross earnings for that period is $1000, so the employee has contributed 8% of their gross earnings. The Employer Maximum is 4% so the employer will match no more than 4% of the employee's gross earnings at a rate of 100%. Four percent of the employee's gross earnings is $40 and 100% of $40 is $40, so the employer's contribution is $40.
Employer Bottom Tier (and Top Tier) Match Rate
This field is used to set up a deduction for the 401(k) Tiered and Safe Harbor 401(k) retirement plans. The Both of these retirement plans have a tiered matching contribution for the employer. This is the amount of the employees’ contribution that the employer matches. This amount is typically expressed as a percentage or in terms of “cents on the dollar”. There is a bottom tier and a top tier. The Employer Bottom Tier Match Rate is the first tier of the employer's matching contribution. The Employer Top Tier Match Rate is the second tier of the employer's matching contribution.
The employer's Employer Bottom Tier Match Rate is 100%, Employer Bottom Tier Maximum is 3%, Employer Top Tier Match Rate is 50% and the Employer Top Tier Maximum is 6% for the following examples:
- Example 1: An employee contributes 4% of their $1000 per pay period salary. The employee contributes $40. The employer would contribute 100% of the employee's contribution up to 3%. Anything the employee contributes over 3% of their gross earnings but up to 6% of their gross earnings is matched at 50%. The employee contributes 4% of their gross earnings which is $40. The first $30 of that is matched dollar for dollar, so the employer contribution for the first tier is $30. The last $10 of the employee's contribution is matched at 50%, so the employer contribution for the second tier is $5. The total employer contribution is $35 (total of the first and second tier employer contributions).
- Example 2: An employee contributes a flat rate amount of $80 per pay period. The employee's gross earnings for that period is $1000, so the employee has contributed 8% of their gross earnings. The first $30 of this employee's contribution is matched dollar for dollar, so the employer's contribution for the first rate is $30. Remembering that the employer only matches up to 6% of an employee's gross earnings ($60), $20 of the employee's contribution will not be match. Only $30 additional dollars of the employee's contribution will be matched at a 50% rate, so the employer's contribution for the second tier is $15. The total employer contribution is $45 (total of the first and second tier employer contributions).
Employer Bottom Tier (and Top Tier) Maximum
This field is used to set up a deduction for the 401(k) Tiered and Safe Harbor 401(k) retirement plans. The Both of these retirement plans have a tiered matching contribution for the employer. This is the maximum amount of an employee's gross earnings that an employer will match. This amount is expressed as a percentage (%).
See the examples above for the Employer Bottom Tier (and Top Tier) Match Rate definition.
Employer Contribution Rate
This field is used to set up a deduction for the SEP IRA retirement plan. This is the rate of contribution for the employee's earning based contribution. This amount is typically expressed as a percentage or in terms of “cents on the dollar”.
The employer's Employer Contribution Rate is 50% and the Employer Maximum is 6% for the following examples:
- Example 1: An employee contributes 4% of their $1000 per pay period salary. The employee contributes $40. Since the employer's contribution is based on the employee's salary, the employee's contribution does not affect the calculation of the employer's contribution. Six percent of the employee's salary is $60. Fifty percent of that is $30, therefore the employer would contribute $30.
- Example 2: An employee contributes a flat rate amount of $80 per pay period. The employee's gross earnings for that period is $1000, so the employee has contributed 8% of their gross earnings. Since the employer's contribution is based on the employee's salary, the employee's contribution does not affect the calculation of the employer's contribution. Six percent of the employee's salary is $60. Fifty percent of that is $30, therefore the employer would contribute $30.
Employer Contribution Maximum
This field is used to set up a deduction for the SEP IRA retirement plan. This is the maximum amount of an employee's gross earnings that an employer will contribute . This amount can be expressed as a percentage.
See the examples above for the Employer Contribution Rate definition.
Employer Flat Rate Contribution Option
This term applied to the Safe Harbor 401(k) and the Simple 401(k) retirement plans. The Employer Flat Rate Contribution Option refers to the option that an employer has to contribute a percentage of an employee's gross earnings instead of an employer contribution based on the employee's contribution. When using the Employer Flat Rate Contribution option an employer will contribute for an employee even if the employee does not contribute to the plan. For employer to set up an employee to receive the Employer Flat Rate Contribution, 'Yes' must be selected in the Eligible Employee field.
Employer Matching Contribution Option
This term applied to the Safe Harbor 401(k) and the Simple 401(k) retirement plans. The Employer Matching Contribution Option refers to the option that an employer has to contribute based on an employee's contribution instead of an employer contribution based on a percentage of the the employee's gross earnings. When using the Employer Matching Contribution an employer will contribute only if an employee contributes to the plan.