Businesses can create stronger incentives for their employees to invest in their company-sponsored 401(k) retirement accounts – without having to increase their total contribution costs – according to a new analysis by Principal Financial Group Inc.

The design of the employer match can be a powerful motivator, even when the employer’s total contribution doesn’t change, said Barrie Christman, Principal’s vice president of individual investor services. A higher target deferral in the match formula spurred participants to save more, as shown in the chart, even though the total employer contribution remained at 2 percent of pay. For example, a company match of 25 percent of up to 8 percent of pay generated an average participant contribution of 7 percent, compared with a 5.3 percent contribution rate for a match of 100 percent of up to 2 percent of pay.

“This is significant because it shows that employers can incent better savings behavior without having to increase their costs,” Christman said.

Further analysis of a sample group making contributions and receiving an employer match shows that 43 percent of those participants fall within the 6 to 10 percent contribution range, and 26 percent are contributing 11 to 15 percent.

“We believe most retirement plan participants should be saving in the 11-15 percent range – including employer match – in order to have a sufficient income at retirement,” Christman said. Of the sample group, 75 percent were deferring up to their employer’s matching contribution.

“This statistic clearly illustrates how powerful the match can be in promoting better savings behavior,” she said. “Employees don’t want to ‘leave money on the table.’”