Stretching the 401(k) Match Contribution – A Good Idea?

One theory retirement plan sponsors consider when determining ways to increase participation and deferral rates among 401(k) plan participants is known as “stretching the 401(k) contribution match”.  “Stretching the match” means raising the employee contribution threshold to receive the full employer match.

As an example, instead of giving participants 100% on the first 3% of their salary deferral into the plan, a plan sponsor would still offer a maximum 3% value but to earn the full match a participant would need to defer 6% of their salary. In this scenario, a “stretch-match” would look like this: 50% up to 6%.

You might expect that stretching the deferral amount needed to receive the maximum employer match would result in higher contribution levels and plan participation. However, a study by Vanguard examined this scenario and the results may surprise you.

Study findings

Vanguard’s 2018 study titled, Stretching the Match: Unintended Effects on Plan Contributions found some inadvertent consequences when plan sponsors try to increase contributions and participation by increasing the amount employees need to defer in order to receive the full employer match.

Vanguard found that higher match thresholds decrease employee deferrals and overall plan participation. As far as numbers go, the study found that plans with stretch-match formulas saw an overall decrease in participation rates ranging from 25% to 50%; while plans that offered a 100% match saw participation rates that were 20% to more than 2x higher than their stretch-match peers.

Similar results were found when evaluating combined employee and employer plan contributions. Plans that offered 100% match of 4% or 5% had  2x the plan contribution rates than their stretch-match peers. While plans with 100% to 3% had approximately 40% higher contributions rates compared to plans with the same match value under a stretch-match arrangement.

Implications for Plan Sponsors

While the idea of a stretch-match is appealing for plan sponsors who would like to bolster participation and total contributions rates, they should be mindful of the data that suggests adverse implications. While this may seem counterintuitive, the data in the Vanguard study bears this out.

So, what’s the most effective way of driving participation and contribution rates? Vanguard’s study continues by saying “strategies such as automatic enrollment with strong initial default deferral rates and automatic annual deferral rate increases, coupled with stretched matches, could be used to improve saving rates”. The study continued by saying the “research shows that higher initial default deferral rates in automatic enrollment plan designs are the most effective way to raise employee-elective deferral rates”.


Most plan sponsors want to see their employees save as much as possible for retirement. Retirement readiness and overall financial well-being have become key priorities for organizations who want to help employees be able to retire on time and lead more productive and less financially stressed lives.

Rather than using a stretch-match type of arrangement, employers are far better off establishing the maximum matching deferral percentage at a lower value and matching at 100%. This type of matching formula combined with strategies like auto enrollment and auto escalation yields better results. Combining these tactics with employee financial wellness programs will go a long way in helping your employees get on track to a comfortable retirement and will make them less prone to financial stress while they are working.

If you are a plan sponsor who struggles to drive participation and deferral rates in your workplace retirement plan, contact our team of Retirement Plan Specialists who can help you design a plan that fits your needs. Greenspring can also help with employee engagement through our financial wellness platform – (k)larity @ Work™, where employees get direct access to CERTIFIED FINANCIAL PLANNNER™ professionals for all their financial needs.

For more information on our retirement consulting services along with our (k)larity @ Work™ financial wellness programs check us out at or give us a call at 443-564-4600.


Vanguard Center for Investor Research. (2018). Stretching the Match: Unintended Effects on Plan Contributions [White paper]. Retrieved from

Information contained herein has been obtained from sources considered reliable, but its accuracy and completeness are not guaranteed. It is not intended as the primary basis for financial planning or investment decisions and should not be construed as advice meeting the particular investment needs of any investor. This material has been prepared for information purposes only and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Past performance is no guarantee of future results.

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