Costco auto-contributes 9% for long-term workers as employer 401(k) benefits vary widely

Average employer match stands at 4.7% of salary, Vanguard finds

Costco Wholesale automatically contributes an amount equivalent to 4% of each employee’s pay into their 401(k) accounts — regardless of whether the worker contributes anything — and raises that contribution to 9% for employees with 25 or more years of service, according to a Wall Street Journal report published Sunday. For employees with at least a year of service, the contribution is automatic, and the company also offers a small match that allows workers to receive up to an additional $500 annually if they contribute $1,000.

The program has helped many thousands of Costco’s front-line hourly workers amass over $1 million in their 401(k) accounts, the Journal reported. The company views the retirement benefit, alongside inexpensive healthcare and higher-than-normal hourly wages, as a retention strategy — keeping turnover low reduces costs associated with training new hires and leads to better customer service, according to the Journal.

The average company 401(k) match is about 4.7% of eligible salary, according to a Vanguard analysis of plans it manages. Only 6% of those plans offered a promised matching contribution totaling 7% or above in 2025.

Some employers go well beyond that average. Southwest Airlines offered a dollar-for-dollar match of up to 9.3% of employees’ salaries in 2024, the Journal reported. Boeing boasts an even higher one of 10% of pay for eligible workers, depending on job classification and union agreements. Competing credit-card giants Visa and Mastercard offer better than dollar-for-dollar matching: Visa puts in $2 for every $1 an employee deposits up to the first 5% of pay, and Mastercard puts in $1.67 for every $1 on the first 6%. Both add up to a 10% total employer contribution, though employees do not need to put away as much to earn it.

Chris West, a managing director at human-resources consulting firm WTW, told the Journal that the warp-speed matching rates are distinctive and create strong incentives for employees to contribute. “It’s distinctive,” West said. “It probably creates really strong incentives for employees to contribute. It’s also really easy to communicate.”

Nonmatching contributions — also called nonelective contributions — are a different structure used by some employers. Costco’s strength lies in its nonelective contributions, even with a limited matching program, according to the Journal. Of the plans Vanguard tracked, 37% used both matching and nonelective contributions, and 11% used nonelective contributions alone.

Altria Group uses a combination approach: the tobacco company matches employees up to 3% of pay, but adds a profit-sharing plan that brings the total employer contribution to 13% to 17% of pay. The Aerospace Corp., a nonprofit government contractor, uses a 3% match but provides a total of 12% for the longest-tenured employees through added nonelective contributions.

Unionized workers at Ford Motor Co. and General Motors receive a 10% nonelective contribution as their retirement plan, with the employer contributions bumped up from 6.4% as part of contract negotiations in 2023. Both automakers transitioned away from offering pensions to new hires about two decades ago.

MSI previously reported that almost half of private-sector employees in the United States, about 57 million workers, lack access to a workplace retirement plan at all, according to the National Institute on Retirement Security. State-level programs and federal legislation have attempted to close the savings gap.

Employee stock ownership plans, or ESOPs, offer another retirement structure. Publix, a Florida-based grocer, automatically provides employees with shares of company stock after they have clocked 1,000 hours within a year and offers an option for them to purchase more, the Journal reported. The company says some of its cashiers have become millionaires through stock ownership.

Stewart’s Shops, a regional gas and ice-cream chain in Vermont and upstate New York, operates an ESOP-only program in lieu of a 401(k). The company says its employees have seen retirement contributions averaging 17% in the past five years and that over 200 of its workers have become millionaires through stock ownership, according to the Journal.

A growing number of employers now allow workers to receive matching contributions on student-loan payments, enabled by the federal Secure 2.0 Act passed in 2022. Boeing is among that group: a worker who puts 10% of salary toward paying off a qualified loan receives a matching amount from the company in their 401(k). Other companies that have adopted the feature include Verizon, Chipotle, Comcast, Walgreens, and News Corp, the Journal reported.

Legal-services firms are disproportionately likely to opt for nonelective contributions alone, according to Vanguard data cited by the Journal. The structure is less common in other sectors.

Employers in specialized fields who want to stay competitive with rivals often conduct benchmark surveys to assess what benefits most attract their staff and what rival companies offer, the Journal reported.