401(k) true-up
Summary Definition: An extra employer contribution to an employee’s retirement savings to fulfill the plan’s required annual matching amount.
What is a 401(k) true-up?
A 401(k) true-up is an extra contribution to an employee’s retirement savings account to fulfill sponsored retirement plan obligations—specifically when a plan calculates employer matching contributions on an annual plan-year basis rather than strictly per pay period.
A true-up usually occurs when the retirement plan document includes an annual match formula for the employer to match the employee’s contributions to the savings account, but per-paycheck matching calculations have fallen short of the agreed-upon annual amount. In such cases, employers process an extra year-end payment to fulfill the required matching amount they owe.
401(k) matching contribution(s)
To make payroll deductions for retirement savings more appealing, employers sometimes offer to match the contributions their employees make. These matching contributions are usually to a specified limit or amount, such as the first 5% of the employee’s annual eligible compensation (capped at the IRS annual compensation limit of $360,000 for 2026 under IRC § 401(a)(17)).
For example, if an employee makes $50,000 a year and their employer offers up to 6% dollar-for-dollar matching, that employer will contribute $3,000 every year (0.06 × 50,000) to the employee’s retirement savings account, provided the employee contributes at least 6% ($3,000) over the plan year.
Key takeaways
- A 401(k) true-up is an extra payment to fulfill an employer’s annual matching amount to an employee’s savings.
- It’s done when the employer’s total per-paycheck matching contributions at the end of the year are less than the plan's annual formula requires.
How to calculate a 401(k) true-up
Since per-pay-period matching contributions are only made when an employee makes a deferral in that pay period, true-ups are most commonly needed when an employee front-loads contributions and reaches the Internal Revenue Service’s (IRS) maximum elective deferral limit ($24,500 for 2026 under IRS Notice 2025-67, not counting age-based catch-up contributions of $8,000 for ages 50+ or $11,250 for ages 60–63) early in the year, or when an employee makes irregular contributions to the account.
401(k) true-up examples
Suppose Gina has a new job where her employer offers a dollar-for-dollar match on up to 5% of her $65,000 annual salary. This means Gina’s employer will match her contributions to her 401(k) account up to $3,250 a year (65,000 × 0.05).
Since Gina’s employer processes contributions each pay period and she’s paid every two weeks (i.e., 26 times a year), on each paycheck she'll receive $2,500 in gross pay (65,000 ÷ 26). If she uses any of that gross pay to contribute to her 401(k), her employer will match her contribution up to 5% of that gross pay (2,500 × 0.05 = $125).
Gina may choose to contribute more than that, but her employer will only match up to that 5% ($125) each time.
| Gina's 401(k) plan | Value |
|---|---|
| Gross pay per paycheck | $2,500 (every two weeks) |
| Annual gross pay | $65,000 |
| Maximum employer match | 5% of gross pay |
| Maximum employer match amount | $125 per paycheck ($3,250/year) |
True-up scenario 1: Employee reaches IRS contribution early
Pretend in 2026 Gina chooses to contribute ten times the amount her employer matches per paycheck (i.e., $1,250 per paycheck) for the first 19 pay periods ($1,250 × 19 = $23,750), and a final capped contribution of $750 on her 20th paycheck to reach the 2026 IRS annual elective deferral limit of $24,500 ($23,750 + $750 = $24,500). After her 20th paycheck, she is no longer allowed to make regular elective deferrals for the remainder of the year.
Because Gina contributed at least 5% of her annual salary ($24,500 total, or 37.69% of $65,000) to the account—and her $750 deferral on paycheck 20 still exceeded 5% ($125) of her $2,500 paycheck—her employer is obligated under an annual match plan to provide the full $3,250 annual match. However, since Gina only made contributions across 20 paychecks that year, her employer only made 20 per-paycheck matching contributions, which means it only contributed $2,500 ($125 × 20) of the required $3,250 for that year.
As a result, her employer needs to make a true-up contribution of $750 ($3,250 − $2,500 = $750) to make up for the shortage.
True-up scenario 2: Employee makes irregular contributions
Instead, pretend Gina chooses to only make a single $1,000 contribution each quarter (four contributions of $1,000 across the year, totaling $4,000, or 6.15% of her $65,000 annual salary). By the end of the year, she'll have contributed more than 5% ($3,250) of her annual salary.
But since she only made four contributions that year, her employer only made four matching contributions capped at the maximum of 5% ($125) per paycheck. This means her employer only contributed $500 ($125 × 4 = $500) of the offered $3,250 annual match for that year.
As a result, her employer needs to make a true-up contribution of $2,750 ($3,250 − $500 = $2,750) to make up for the shortage.
401(k) true-up requirements
Since employers can choose whether or not to offer matching contributions—and whether the plan document defines the match period on a per-pay-period or annual plan-year basis—not all employees will receive a 401(k) true-up at the end of a calendar year.
For employers whose plan documents require an annual true-up, contributions must be deposited by the employer's federal income tax filing deadline (including extensions) under IRC § 404(a)(6) to be deductible for the prior tax year, and no later than the end of the following plan year under Treasury Regulation § 1.401(m)-2(a)(4)(iii) to count toward Actual Contribution Percentage (ACP) nondiscrimination testing.
The IRS also offers a fix-it guide for correcting errors and making missed true-up contributions.