While the majority of employers offer a company match on their 401(k) plan, employees are not taking advantage of the benefit, passing up the chance to potentially receive thousands of dollars every year.

A new research report from Financial Engines, an investment advising company, estimates that Americans leave $24 billion in unclaimed 401(k) company matches on the table each year.

Financial Engines examined the saving records of 4.4 million retirement plan participants at 553 companies, and found that one-in-four employees (25%) miss out on receiving the full company 401(k) match by not saving enough. The typical employee failing to receive the full match leaves $1,336 of potential “free money” on the table each year, which equates to an extra 2.4% of annual income not received. With compounding, this could amount to as much as $42,855 over 20 years.

Also see: Employer match not strong motivator for 401(k) enrollment

And while it’s perhaps no surprise to plan sponsors that their employees are leaving money on the table, what is surprising is the amount, says Greg Stein, director, financial technology at Financial Engines. “We knew, in general, that many people were not saving enough to get the match – that’s pretty common knowledge in the industry – but what we didn’t know, and what we hope will be a wake-up call for people, is the amount being left on the table,” he says.

Lower-income and younger employees were much more likely than others to miss out on at least part of their employer matching contribution, according to the research.  For example, 42% of plan participants earning less than $40,000 per year do not take full advantage of the employer match, compared to just 10% of employees earning more than $100,000 annually. Likewise, employees under age 30 are approximately twice as likely to miss out on the employer match compared to employees over the age of 60 (30% vs. 16%).

There are several tactics plan sponsors can use to help employees take advantage of the full company match, including extra reminders about the match, defaulting plan participants at a higher savings rate, offering investment advisory services, auto-escalating employees’ savings rates and reworking the match formula.

Also see: Workers want more active employer role in retirement planning

“The most common way we’re seeing most employers make sure individuals are receiving the full company match is communicating [it] to participants – something that communicates to them when they’re … leaving money on the table,” says Rob Austin, director of retirement research with consulting firm Aon Hewitt.

The majority of employers with 401(k) plans (92%) match employees’ 401(k) contributions, with the most common scenario being one dollar for every dollar the employee contributes up to 6% of the employee’s annual salary, according to Aon Hewitt data. That’s a shift from just a few years ago, when the most common match formula was 50 cents for every dollar the employee contributed, up to 6% of salary.

“There are more dollars being devoted to matches than we’ve seen in the past,” says Austin. “And it’s not that employers are being richer overall from a retirement standpoint, but rather that they are shifting their money from maybe a defined benefit pension plan or maybe a profit sharing plan to now something that’s more contingent on workers putting their own money in the plan in order to receive the full company benefit.”

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