401(K) AND SIMPLE IRA: WHAT THE MATCH COSTS PER HOUR.
A match is a percent of pay, so its cost per hour is the wage times the match percent. A 4 percent match on a $28 wage is $1.12 per paid hour, or about $1.29 per productive hour once unproductive paid time is spread across the hours that produce work. The match is one line in the labor burden, and it moves up and down with every wage and every overtime hour. Plan fees are a second, smaller cost whose payer depends on the plan terms. A contractor starting a first plan also pays setup costs before the first match goes out, and any tax credit for those costs comes later, on the tax return.
This page shows how a match percent becomes a dollar cost per hour, why the cost differs by labor class, how it interacts with prevailing wage fringe, and what a first plan does to cash. It does not say which plan to choose. A plan advisor does that.
WHAT IT MEANS.
An employer retirement match is the money a contractor pays into an employee's retirement account in proportion to the employee's pay, through a plan such as a 401(k) or a SIMPLE IRA. Because it is a percent of wages, it is a cost on every hour the employee is paid.
Plan rules, tax rules and state law differ, and plan documents set the terms. Whether a match is a safe harbor match, a SIMPLE IRA match or another formula, the owner checks the details with the plan advisor and a tax professional. IRS dollar limits change yearly, so this page prints none of them. SPM does not handle payroll or place plans. It builds the cost into the labor burden and checks that the books match what the plan documents say the company owes.
HOW A MATCH BECOMES A COST.
A match is a percent of pay, so it follows every wage
The employer contribution is set by a formula tied to compensation. Three common formulas show the range. A basic safe harbor 401(k) match is 100 percent of the first 3 percent of pay an employee defers plus 50 percent of the next 2 percent, so the most the company pays for one employee is 4 percent of pay. A safe harbor alternative is a contribution of 3 percent of pay to every eligible employee whether or not the employee defers anything. A SIMPLE IRA match is dollar for dollar up to 3 percent of pay, or the company can choose 2 percent of pay for every eligible employee. The plan document says which pay counts, and some plans count overtime while others do not. SPM reads the plan document before it sets the burden line.
A match only costs money when someone defers, a nonelective contribution costs it for everyone
A match is paid on the employees who put in their own money. If half the crew defers, the match cost is about half of the maximum. A contribution made for all eligible employees costs the same whether anyone defers or not. That makes the match a variable cost and the all-employee contribution closer to a fixed percent of payroll. For bidding, SPM prices the burden at the maximum the formula can cost, because a whole crew can decide to defer in the same year, and then compares it to the match the books record.
The match enters the labor burden as dollars per hour
The labor burden page adds payroll tax, workers comp, insurance, benefits and the retirement match to the wage, then divides by productive hours. The match is the simplest line in that stack: match percent times wage. It does not depend on a state rate or a class code the way workers comp does. It does depend on which employees are in the plan, so SPM calculates it by labor class and not as one company-wide percent.
Plan fees are a second cost, and who pays depends on the terms
A plan can have setup costs, an administration charge, recordkeeping and fees on the investments inside it. DOL materials describe investment fees as usually paid by the participants as a percentage of assets, and administrative fees as paid by the employer, charged against plan assets, or split. Providers price differently and the contract controls, so SPM asks for the fee schedule and records who pays each line. A fee the company pays in a flat amount goes into overhead. A fee charged per employee can be spread across the hours of the employees in the plan, the same way a per-employee insurance cost is.
Matching a percent of pay costs less per hour for a laborer than for a project manager
The percent is the same, so the dollars follow the wage. On a $28 wage a 4 percent match is $1.12 per paid hour. On a $50 an hour equivalent salary for a project manager it is $2.00 per paid hour. Flat costs work the other way: a fixed plan fee per participant is the same dollars on a $28 wage as on a $50 wage, so it is a bigger share of the laborer's cost. The effect on bids is that field labor classes carry a lower dollar match per hour, and office and management classes carry a higher one. Field labor match goes into the job cost burden. Office and management match goes into overhead, where it is recovered through the overhead rate.
Prevailing wage work changes what the match is worth
On a prevailing wage job, the wage determination sets a base rate plus a fringe amount per hour, and the employer has to pay the full total. DOL guidance allows credit toward the fringe for contributions to a bona fide plan, with conditions: the contribution is made irrevocably to a trustee or third party, the plan is bona fide, and credit is figured worker by worker. The DOL rules also require annualization, which divides the contributions by all hours worked, prevailing wage and private work together. Defined contribution plans with immediate participation and essentially immediate vesting are excepted from annualization without a request. Whether a given match counts is a question for the plan advisor and the DOL materials, not a rule of thumb. The health benefits and prevailing wage fringe page covers the same fringe credit for health plans.
The first plan is a cash event before it is a benefit
Setup costs come first. The first payroll with a match adds the match on top of the normal payroll cost, and the cost recurs every pay period after that. If the contribution is for all eligible employees, the cost starts from the first eligible paycheck, whether anyone has signed up or not. The IRS describes a tax credit for the ordinary and necessary startup costs of a new plan for eligible small employers, claimed on a tax form. That credit reduces tax later. It does not return the cash when the setup fee is paid, so a contractor with a thin month plans the setup cost as a payment in the month it happens.
WHAT IT LOOKS LIKE IN DOLLARS.
Wage $28.00. Match at 4 percent of pay is $1.12 per paid hour. Over 2,080 paid hours that is $2,329.60 a year for one employee at full participation. Divide by 0.865, which is 1,800 productive hours out of 2,080 paid, and the match costs about $1.29 per productive hour. On the labor burden page's $28 example, which used a 3 percent match of $0.84, a 4 percent match moves the total from $43.15 to about $43.47 per productive hour. A 3 percent contribution for all employees at $28 is the same $0.84 per paid hour whether anyone defers or not.
A 4 percent match at $28 is $1.12 per paid hour. At $38 it is $1.52, and at a $50 equivalent salary it is $2.00. A flat plan fee of $3,000 a year, spread over 25 employees paid 2,080 hours each, adds about $0.06 per paid hour to everyone in the plan. The fee is the same for the laborer and the project manager, so it is a larger percent of the laborer's wage. The inputs are round and invented, and the plan's own documents replace them.
Take 20 field employees averaging $28 an hour and 2,080 paid hours each, which is $1,164,800 of payroll. At the maximum 4 percent match with full participation the match costs $46,592 a year. If half the crew defers, it costs about $23,296. A 3 percent contribution for all 20 employees costs $34,944 whether anyone defers or not. On $6M of revenue the full-participation figure is 0.78 percent of revenue.
WHAT WE CHANGE.
SPM adds a retirement line to each labor class: match percent times wage, using the formula in the plan document, divided by productive hours like every other burden line. Field classes go into the job cost rate. Management and office classes go into overhead.
Bids use the highest match the formula can cost. Each month SPM compares the match recorded in the books to that figure, so a low participation year does not mask a plan that would cost more if everyone enrolled.
SPM gets the fee schedule and codes each fee to the company or to the plan. Fees the company pays go to overhead or the burden line, depending on whether they are flat or per employee.
For a job with a fringe requirement, SPM lays the plan contribution beside the fringe in the wage determination and flags the question for the plan advisor: does the match count, and at what hourly rate. The bid then includes the cost with or without that credit.
Before a plan starts, SPM adds setup costs and the first payrolls' match to the cash forecast, and records any startup credit in the month it is claimed, not the month the plan opens.
FLAT MONTHLY FEE. NO SURPRISES.
Three tiers, priced by your trailing twelve month revenue. Which one you're in depends on how much of the work you want off your desk. No hourly billing. No payroll. The one-time onboarding fee is right here in the table.
| Last 12 months revenue | Monthly fee | One-time onboarding |
|---|---|---|
| Up to $1M | $1,900 to $2,900 | $1,000 |
| $1M to $3.5M | $2,600 to $3,900 | $1,500 |
| $3.5M to $6.5M | $3,800 to $5,700 | $3,000 |
| $6.5M to $9.5M | $5,100 to $7,100 | $4,500 |
| $9.5M to $12.5M | $6,100 to $8,500 | $6,000 |
| $12.5M to $15.5M | $7,400 to $11,000 | $7,500 |
| $15.5M to $18.5M | $9,400 to $13,500 | $9,000 |
| $18.5M+ | Quoted individually | Quoted individually |
The onboarding fee covers migrating your books back to the start of your last taxable year and getting you fully operational in 60 days. It's billed once, with your first invoice. It's the same for all three tiers. Your first month is prorated, and your monthly engagement starts on the first of the first full month.
Range reflects the three tiers below. Which one you're in depends on how much of the work you want off your desk. No payroll. No hidden line items. The onboarding fee is right here in the table.
You stop guessing.
You get the CFO work. Job costing built against the way you estimate, a 13 week cash forecast, monthly WIP, and a meeting every month that ends in decisions and never in a report.
Your bookkeeper still does the books.
You stop touching the books.
Everything in Core, and we do the bookkeeping and the controllership as well. Your office stops answering coding questions and stops fixing a reconciliation that will not balance on the last day of the month.
We do the books. No payroll.
Every job shows its margin while it is still open.
Everything in Executive, plus the job costing and WIP platform set up, loaded with your cost codes, and managed for you every month. You never have to learn it.
We do the books, the job costing, and the software. No payroll.
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