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. Since the share employees pay varies a lot between plans, comparing health insurance quotes can help workers gauge whether their employer’s plan is competitive. 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. Workers stuck with high contribution amounts sometimes look at ways to lower their health insurance costs, especially when family coverage runs into the thousands each year.
