Employee matching contributions remain one of the most common features of employer-sponsored retirement plans, with 98% of employers adding some sort of match (either partial or full) to increase their teams’ savings potential. But matching is no longer just a benefit–it’s also a strategy for employers who want to boost their business’ competitiveness.  

On the plan sponsor side, employers can use 401(k) matching to attract and retain top talent and boost productivity and engagement. Even more, they’re able to enhance their profitability further by tying matches to vesting schedules that encourage employees to stay for a certain amount of time before they gain full ownership of their funds, meaning more savings over time for them and better utilization rates for employers.

If you’re a small business owner, understanding the ins and outs of 401(k) matches now will help you reevaluate and readjust your plan so that you can stay ahead and make the most of your retirement plan.

Partial 401(k) Matches in 2025

With a partial match, an employer would match only a chosen part of an employee’s contributions, usually a specific percentage of their salary. This is one of the most common match formulas used by small and mid-sized businesses who want to provide retirement benefits and incentivize participation but are focusing more on costs.  

In 2025, a typical partial match formula is 50% match of the first 6% of pay that an employee contributes. So, if an employee earns $100,000 yearly and contribute 6% of that salary, the employer will contribute 50%, or $3,000. Even if the employee contributes more, there is a cap at the first 6% of eligible compensation, ensuring predictability in costs.  

Why Employers Choose Partial Matches

The reasons why some business owners prefer a partial matching formula include:

  • Cost control: Less money is spent by employers while still rewarding employees.
  • Increases participation: Even a partial match helps employees save significantly more, so they’ll willing to stay engaged with their plan.
  • Scalability: Partial matches are designed to be flexible and grow with companies.

Full 401(k) Matches in 2025

With a full match, employers contribute dollar for dollar what the employee defers, which is usually based on a specific salary percentage. Common formulas are 100% match on the first 6%, 5%, or 4% of pay. As an example, if an employee contributes 6% of their $100,000 salary, or $6,000, their employee will also contribute $6,000.

In 2025, research has shown that most employers have set their matching caps above 3%, meaning that there is a significant shift to focus on long-term savings outcomes and employee financial well-being. With more generous matches, there are also quite a few company benefits, such as standing out in a competitive market.

Why Employers Choose Full Matches

The reasons why some business owners prefer a full matching formula include:

  • Stronger recruiting results: Full matches are often more appealing to top talent who prioritize robust benefits.
  • Simplified management: Full match formulas are straightforward and easier for employees to stay on top of on their own.
  • Better testing outcomes: Increased participation from lower-level employees can help ensure you pass yearly compliance tests.

Safe Harbor 401(k) Matching Formulas for 2025

A Safe Harbor plan is a popular type of 401(k) that allows businesses to automatically bypass annual IRS nondiscrimination testing requirements if they follow a standard matching formula.  

Some of the most common match option in 2025 include:

  • Basic match: 100%, or full match, on the first 3% of pay and 50%, or partial match, on the next 2%.
  • Enhanced match: 100%, or full match, on the first 4-6% of pay.
  • Nonelective contribution: 3% of pay to all employees, no matter their participation.

2025 401(k) Contribution Limits

For 2025, the IRS has updated contribution limits, allowing employees and employers to maximize their plans and save more aggressively.

  • Employees can contribute up to $23,500 (up from $23,000 in 2024).
  • Employees age 50 and older can add an additional $7,500 on top of the $23,500.
  • Employers can add up to $46,000 to an employee’s 401(k), bringing the total combined contribution limit to $69,000, or $76,500 if the employee is 50 or older.

Solo 401(k) Plan Contribution Limits

If you’re a solopreneur looking into a solo 401(k) plan, fortunately, these plans follow basically the same IRS contribution limits as traditional group plans. The difference is that as the employee and employer, you can match your own contributions of up to 25% of your compensation.

So, you can contribute up to $69,000 in 2025 (or $76,500 if age 50 or older). But, you get more benefits by not having to handle extra administration and testing requirements that come with having a team.

Other Little-Known Matching Benefits for Employers

On top of saving money and scalability, there are some other different matching benefits that can create surprising advantages for businesses. Here are the ones that are often overlooked:

  • Unlock more tax credits: Because of the SECURE Act, businesses can receive up to $1,000 per employee in tax credits, making having a plan more affordable than ever.

  • Improve compliance testing headaches: By encouraging more employees to contribute, employers can have an easier time passing nondiscrimination tests.

  • Reduced Taxable: Contributions help generally reduce taxable income for employers, meaning even more savings on top of tax credits.

  • Lower Healthcare Costs: Matching helps employees become more financially secure and less stressed, reducing sick days and wellness expenses over time.

Ready to Make a 401(k) Match Work for Your Business?

By offering a 401(k) with employer matching, you’re not only helping to build up your employees’ financial lives, but you’re future proofing your company. No matter if you decide to do a partial or full 401(k) match, you’ll unlock valuable benefits, and Future You will be thankful you made the move now.

At Ubiquity, we make it simple to launch a 401(k) that is tailored for small business success. Whether you’re upgrading a current plan or starting from scratch, we’ll help you get set up, navigate compliance, keep costs low with our flat fee model, and choose your best matching formula.

Matching FAQs

Is a 401(k) match like free money?

Yes, and not contributing enough to an employer’s full percentage is like leaving money on the table.

Can employers change their 401(k) at any time?

Yes, they can. But there are certain plan rules they must follow, and any updates must be communicated to employees in advance.

Are 401(k) matches taxed?

They’re not taxed as income when contributed but are taxed as normal income when withdrawn during retirement.

Do part-time employees still get a match?

Yes, thanks to the SECURE 2.0 Act! Long-term part-time employees may be eligible for matching depending on their company’s plan design and hours worked.

Is the unused match money accessible if an employee doesn’t contribute enough?

If an employee doesn’t contribute the full amount (for example, only 4% of a 6% cap), the unused portion stays with the employer. You won’t be able to access it or “make up” for it.

What happens to matching contributions is an employee leaves their company?

Depending on their company’s vesting schedule, if an employee leaves before, they become fully vested, they might lose part or all of their employer contributions.

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