Employee Contribution

Updated: 09 June 2023

What Does Employee Contribution Mean?

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

Insuranceopedia Explains Employee Contribution

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

Typically, employee contributions are just a fraction of the entire cost of an insurance plan, and they are also subject to the 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 family coverage averaged $4,824 per year.

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