Employee Contribution

What Does Employee Contribution Mean?

Employee contributions refer to the total amount of money paid by an employee to fund a deferred benefit, such as an annuity or pension plan.

Insuranceopedia Explains Employee Contribution

Employee contributions are required when an employer provides employee health insurance and a 401(k) retirement savings plan. Under the Affordable Care Act, employee health insurance is mandatory; however, a 401(k) plan is not required for any company.

Typically, employee contributions account for only a fraction of the total cost of an insurance plan and are subject to limits imposed by the federal government. In 2014, the national average cost of a single employee’s contribution to health insurance in the United States was $1,080 per year, while the average for family coverage was $4,824 per year.