The report outlines four theories about why a higher employer contribution match rate might lead to greater leakage:

Employees with a higher match rate might be opportunistic and plan to leak, viewing it as 'free money' for use at job separation, especially if the 10% penalty is lower than other borrowing costs.
Employees might perceive a higher matching rate as a sign of job security, which could prompt them to overspend during employment necessitating the need for cash at job separation to maintain their spending habits.
The separation of employee and employer contributions on 401(k) statements might create separate 'mental accounts' that encourage employees to treat the employer-contributed funds as a liquid windfall and their own contributed funds as a sacred source of retirement income.
On the other hand, employees may not create separate mental accounts and therefore view their entire account as either a liquid windfall or an untouchable source of retirement security.

Related: $92 billion's cashed out of 401(k) plans each year when workers switch job

Employers have an important role to play in mitigating pre-retirement leakage at the point of job change, the report said. The first way employers can help is to intervene at the point of separation with departing employees to show the effects of leakage on future retirement assets if they drain them and have to start over. On the other side, employers hiring employees can provide 'roll-in' support for consolidating assets from prior employer retirement plans.

Instant Insights /

Pre-retirement 'leakage'? Job switchers are cashing out their 401(k)s at alarming rate

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