Don’t leave your employer match on the table.

Many employers add money to your workplace retirement plan when you contribute. This is called a match. It’s one of the most generous parts of a benefits package, and it’s easy to miss part of it without realizing.

You don’t need to be a numbers person to understand your match. You just need two pieces of information: the formula your plan uses and the vesting schedule. Both live in your plan’s Summary Plan Description, the plain-language booklet that explains your plan’s rules.

How matching formulas work

Many plans match your contributions up to a preset limit. The formula usually has two parts: how much the employer adds for each dollar you put in, and the cap on how much of your pay it will match.

A common way to describe this is something like “50% of the first 6%.” Here’s what that means in practice.

An example, with simple numbers

This is only an example. Your plan’s formula and your pay will be different.

Say you earn $50,000 a year and your plan matches 50% of the first 6% of pay you contribute.

• You contribute 6% of pay. That’s $3,000 a year. Your employer adds 50% of that, or $1,500.
• You contribute 3% of pay. That’s $1,500 a year. Your employer adds $750. You’ve left $750 of possible match unclaimed.
• You contribute 10% of pay. That’s $5,000 a year. Your employer still adds $1,500, because the match only applies to the first 6%.

In this example, contributing 6% is the point where you get the full match. Contributing more can still help you save, but it won’t raise the match.

Formulas vary a lot. Some plans match dollar for dollar. Some match on a tiered scale. Some plans can also make matching contributions based on your qualified student loan payments. Read your plan’s exact wording, and ask your plan administrator if any part is unclear.

Automatic enrollment: check your rate

Many workplace plans now enroll employees automatically. Newer 401(k) and 403(b) plans are generally required to do this. The plan picks a starting contribution rate, and you can change it or opt out.

Automatic enrollment is a helpful nudge. But the default rate the plan picks may not be the rate that gets you the full match. It’s worth logging in and comparing your current rate with your plan’s matching formula. If there’s a gap, you can decide whether to close it now or step up over time.

Vesting: when the match becomes yours

Vesting describes how much of your account you own outright. The rules are different for your money and your employer’s money.

• Your own contributions are always 100% vested. Money taken from your paycheck, plus its earnings, is always yours.
• Employer contributions may vest on a schedule. Your plan sets the schedule, within limits set by federal law.

Cliff vs. graded vesting

There are two common types of schedules.

• Cliff vesting. You own none of the employer contributions until you reach a set number of years of service. Then you own all of them at once. For matching contributions in a 401(k), full vesting can take up to three years under a cliff schedule.
• Graded vesting. You own a growing share each year. For example, a plan might vest 20% after two years and 20% more each year until you’re fully vested after six years.

Some plans vest employer contributions right away. For example, employer contributions to SEP and SIMPLE IRA plans, and to most safe harbor 401(k) plans, vest immediately. Some automatic-enrollment safe harbor plans can take up to two years. You also become fully vested when you reach your plan’s normal retirement age or if the plan ends.

What happens to an unvested match if you leave

If you leave your job before you’re fully vested, you can lose the part of the employer match that hasn’t vested yet. This is called a forfeiture. Your own contributions and any vested employer money stay yours.

This doesn’t mean you should stay in a job just for vesting. Plenty of good reasons to move outweigh a partial match. But if you’re weighing a job change, it helps to know your vesting date. A few weeks or months can sometimes make a real difference.

To find where you stand:

1. Look up your plan’s vesting schedule in your Summary Plan Description.
2. Check your account statement or online account for your vested balance.
3. Ask your plan administrator how your years of service are counted.

Your next step

Log in to your retirement plan account and find two numbers: your current contribution rate and the rate your plan’s formula needs for the full match. Write them side by side. If they match, nice work. If not, you now know exactly how big the gap is.