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The 401(k) True Up: Are you losing thousands in employer 401(k) matching?

retirement savings 401k written on the napkin HFG Trust

Some 401(k) participants are missing out on employer 401(k) matching contributions without even realizing it. This happens when the employer does not have a True Up feature in the 401k plan and the employee:

  1. Does not maximize the employer match every pay period, or
  2. Maximizes their full-year allowable deferral before the end of the year

The True Up feature considers the previous full year of income, deferrals, and matching formula to determine if the employee is owed an additional employer contribution after the end of the year. Most employers make a matching contribution based on a percentage of the employee deferral and their gross wages. The big question is:

Is the match calculated on a pay-period basis or an annual basis?

If the plan calculates matching contributions on a pay-period basis, the employer is not required to True Up after the end of the year; but they are required to True Up if the employer matching is less frequent than per pay period. The True Up feature considers all income and all employee deferrals made during the year, not just per pay period. If a plan does not have this feature, employees may miss out on hundreds or thousands of dollars in matching contributions. Let’s consider three scenarios:

Scenario 1: Full deferrals in fewer than 12 months without True Up

John, age 55, earns $200,000 per year and defers the annual maximum contribution of $26,000 ($19,500 standard plus $6,500 catch-up since he is age 50 or older). His employer makes a 100% safe harbor matching contribution up to 4% of his gross salary and does not have the True Up feature. The match for the full year could potentially be $8,000 ($200,000 x 4%), but the employer matches only during pay periods when John defers. If John were to maximize his full-year deferral limit of $26,000 in the first 6 months of the year, he would miss out on matching contributions during the last half of the year. Here is the math:

Once John’s deferrals stop, the employer matching stops; and he will miss out on matching contributions of $4,000 (4% x $100,000) for wages earned in the last 6 months of the year. 

Scenario 2: Temporarily reduce deferrals below the full match without True Up

John will also miss out on matching contributions if he stops or reduces his deferral rate below the full matching formula for any period.

Let’s say John turns off his deferrals for 3 months and earns $50,000 during this period.  Without a True Up, the missed employer match would be 4% of $50,000, or $2,000.

Scenario 3: 6 Months of deferrals with True Up

In this scenario, John defers during the first 6 months of the year and contributes 10% of his income during those months. The True Up feature considers his full-year salary and deferrals when determining the full-year matching contribution. 

The employer will consider earnings and deferrals for the entire year and make a final matching contribution based on those numbers. Since John deferred at least $8,000 of his annual salary, the employer will provide the additional True Up match of $4,000 for the remainder of the full-year match. 


If you participate in a company 401(k) plan, it is extremely important to know how your employer matches deferrals and if the plan has the True Up feature. If your employer does not utilize a True Up feature, it is important to make 401(k) deferrals every pay period throughout the year based on their matching formula. Deferring every pay period throughout the year will ensure you receive every available dollar of employer matching contribution.

If you have questions about your employer matching calculation, please let us know.  We are happy to help.

You can schedule a meeting with an HFG Trust advisor by calling us at (509) 735-7507.



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