401(k) Match Calculator
Price an employer 401(k) match under 2026 limits — compare safe-harbor formulas and see the annual cost as a share of payroll.
Written by Dorothy Ibrahim, 10+ years in banking & finance
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How we calculate this
This calculator prices what an employer 401(k) match actually costs per year under the 2026 IRS limits, across the standard safe-harbor formulas and any custom "X% of the first Y%" design. It shows the annual employer cost, the cost as a share of eligible payroll, and a side-by-side comparison of every formula — the numbers a plan-design conversation with a provider should start from.
The formulas
- Matched % of compensation (by formula)
- basic safe harbor: 100% of the first 3% deferred + 50% of the next 2% (max 4%) · enhanced: 100% of the first 4% · QACA: 100% of the first 1% + 50% of the next 5% (max 3.5%) · 3% nonelective: 3% to all eligible regardless of deferral · custom: X% of the first Y% deferred
- Annual employer cost (aggregate mode)
- eligible payroll × matched % of comp at the average deferral × participation rateThe 3% nonelective ignores participation — it goes to every eligible employee.
- Share of payroll
- annual employer cost ÷ eligible payroll
- 2026 limit enforcement
- deferrals capped at $24,500; compensation considered capped at $360,000; total annual additions capped at $72,000Catch-up contributions — $8,000 at 50+, $11,250 at ages 60–63 — are informational and employee-funded.
Worked example
- Say eligible payroll totals $300,000, the formula is the basic safe harbor, participating employees defer 5% on average, and participation is 80%.
- At a 5% deferral the basic safe harbor matches 3% + 0.5 × 2% = 4% of compensation — the formula’s maximum.
- Annual employer cost = $300,000 × 4% × 0.80 = $9,600, which is 3.2% of eligible payroll.
- The comparison table at the same inputs: enhanced (100% of first 4%) also $9,600; QACA $7,200 (3% of comp × 80%); 3% nonelective $9,000 (everyone gets it, participation ignored); a custom 50%-of-first-6% match $6,000 (2.5% of comp × 80%).
- Note the trade visible in the table: the nonelective costs $600 less than the basic match here only because participation is 80% — at full participation the basic match would cost $12,000 while the nonelective stays at $9,000.
Rates, benchmarks & sources
- 2026 limits: $24,500 elective deferral, $8,000 catch-up (50+), $11,250 super catch-up (ages 60–63), $360,000 compensation cap, $72,000 total-additions cap — IRS Notice 2025-67
- Basic match (100% of first 3% + 50% of next 2%), enhanced match (100% of first 4%), QACA (100% of first 1% + 50% of next 5%), and the 3% nonelective alternative — IRS safe-harbor 401(k) formulas (IRC §401(k)(12)/(13))
- Safe harbor "usually worth it under ~50 employees" to avoid ADP/ACP testing costs and refund risk — Industry rule of thumb
Figures current as of 2026-07-02. See our methodology & editorial standards for how constants are versioned and verified.
What this tool doesn’t model
- Aggregate mode treats every participant as deferring the average rate on the average dollar — real cost varies with how deferrals distribute across salaries, so treat the result as a budget figure, not a plan quote.
- Plan-administration costs — recordkeeping, TPA and advisory fees, per-participant charges — are not included; they often rival the match cost for very small plans.
- Vesting is not modeled: safe-harbor basic and enhanced matches must be immediately vested, but QACA matches and many custom matches vest over time, and forfeitures reduce real cost below the figure shown.
- True-up provisions, mid-year entry dates, and compensation definitions in your plan document all move the actual cost; the plan document controls, not this estimate.
- The SECURE 2.0 startup credit (up to $5,000/yr) and the tax deductibility of match dollars are noted but not netted out of the cost figure.
Frequently asked questions
What does a safe-harbor formula buy me over a custom match?
Exemption from the ADP/ACP nondiscrimination tests — the annual testing that can force refunds of highly-compensated employees’ (including the owner’s) contributions when rank-and-file participation is low. Safe-harbor formulas cost a defined amount (the basic match maxes at 4% of participating pay) in exchange for that certainty, and the common rule of thumb is that the trade is usually worth it under roughly 50 employees. A cheaper custom match keeps the testing risk.
Why does a $1 of match cost less than $1 of raise?
Two reasons: match dollars are a deductible business expense like wages, but unlike wages they are not subject to employer payroll taxes — no 6.2% Social Security, no 1.45% Medicare, no FUTA or SUTA on the contribution. A raise costs its face amount plus roughly 8% or more in employer taxes; a match costs its face amount. For employees who value retirement savings, the match is the cheaper way to deliver the same dollar.
What are the 2026 contribution limits I need to stay under?
Per IRS Notice 2025-67: employees can defer up to $24,500, with an $8,000 catch-up at 50+ and an $11,250 super catch-up at ages 60–63; only the first $360,000 of anyone’s compensation counts for match formulas; and combined employee-plus-employer additions cap at $72,000 per participant. The calculator enforces the deferral and compensation caps automatically in per-employee mode and warns when a deferral had to be capped.
Should I pick the 3% nonelective or the basic match?
It is a cost-versus-coverage trade the comparison table makes visible. The basic match costs up to 4% of pay but only for employees who defer — at 80% participation and a 5% average deferral, $9,600 on $300,000 of payroll versus $9,000 for the nonelective. Lower participation makes the match cheaper; full participation makes it dearer than the nonelective. The nonelective also guarantees every eligible employee a contribution, which some owners prefer for fairness and recruiting. Plan providers can model your actual census.
Are there tax credits for starting a 401(k) plan?
SECURE 2.0 provides a startup tax credit of up to $5,000 per year for eligible small employers establishing a new plan, plus other credits tied to employer contributions and auto-enrollment — the calculator surfaces this as an informational note. Eligibility depends on employee count, compensation levels, and whether you had a recent plan, so verify the specifics with a tax professional before counting the credit in your budget.
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themoneysheet provides educational estimates, not financial, tax, or legal advice. Figures use published rates and formulas current as of the date shown, but your situation may differ. Consult a qualified professional (CPA, attorney, or licensed advisor) before making financial decisions.