BOSTON (TheStreet) -- How an employer matches employee contributions to retirement plans may have a greater impact on deferral rates than the actual benefit.

Research released today by

Principal Financial Group

(PFG) - Get Principal Financial Group, Inc. Report

suggests that the design of an employer match can be a "powerful motivator" in boosting the amount of money participants put into 401(k) retirement accounts, even though the employer's total contribution doesn't increase.

Using data from 6,560 contracts, the company looked at three employer match formulas with the same maximum employer contribution of 2%. In each scenario, the participant contribution increased as the matching formula was stretched to target higher contributions.

A company offering a 100% match of up to 2% of pay saw an average participant contribution (before the match) of 5.3%. Offering 50% up to 4% of pay boosted deferrals to an average of 5.6%.

Matching 25% of up to 8% of pay led to an even higher deferral rate by employees -- but to only 7%, meaning the employees still left money on the table. When employees can't afford to defer what's needed to get their employer's total match, they lose a little and the company saves.

Nevertheless, Principal is touting stretched matches as a worthwhile benefit strategy.

"While the employer contribution stays at 2%, the higher target deferral in the match formula is spurring participants to save more," says Barrie Christman, vice president of individual investor services at Principal. "This is significant because it shows that employers can

incentivize better savings behavior without having to increase their costs."

-- Written by Joe Mont in Boston.

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