From the December-January 2011 issue of Treasury & Risk magazine

Redesigning 401(k) Match Can Spur Workers to Save

Companies can encourage employees to save more in 401(k) plans by spreading the company match over a bigger portion of employees' contributions, according to a recent analysis by Principal Financial Group.

Principal's examination of its contracts for 6,560 defined-contribution plans found that when companies match 100% of the first 2% of pay saved, employees on average contribute 5.3% of their pay. Companies that match 50% of up to 4% of pay saw an average contribution rate of 5.6%, while those matching 25% of up to 8% of pay had an average contribution of 7% of pay.

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