Sharing Your Experience with a 401(k) True-Up Match

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Topic Author
careerdata
Posts: 332
Joined: Sat Sep 09, 2017 7:12 pm

Sharing Your Experience with a 401(k) True-Up Match

Post by careerdata »

Good morning!

For those of you who receive a 401(k) true-up match from your employer each year would you be willing to share some details such as the following?

--How is it calculated?
--When is it deposited into your account (after the last payroll of the plan year is run or early January after the plan year ends)?
--How is the calculation and contribution of the true-up match communicated to you?
--Who is the plan administrator (Vanguard, Fidelity, etc) that manages your 401(k) plan and applies the true-up match to your account?
--Does your plan also have automatic enrollment and is the existing match one of the alternative safe harbor matches that are available?
--If automatic enrollment can you share which of the alternative designs your employer uses?
--If you have a safe harbor match can you share which of the alternative designs your employer uses?

For some background on this respectful request, I put a 401(k) true-up in place many years ago for a prior employer with Vanguard as the plan administrator but I'm trying to determine what may have changed since then and what the experience is like from the plan participant perspective. Many of the physicians with my current employer want to front-load their 401(k) and HSA contributions in January and I have found a way administratively so they can now front-load their HSA contributions but there is ongoing frustration with me and my CHRO regarding the 401(k) because if they front-load their 401(k) then they are losing company match as the plan currently matches payroll-to-payroll.

My CHRO wants to kick the tires on a true-up match so I am doing some initial modeling on that with our plan year 2021 contributions but I'm very curious to see how this may be addressed with other employers since I last implemented a true-up.

Many thanks in advance for your time and consideration of this request!

Joe
N.Y.Cab
Posts: 412
Joined: Wed Feb 07, 2018 7:46 pm

Re: Sharing Your Experience with a 401(k) True-Up Match

Post by N.Y.Cab »

My company match 50% of contribution up to 6%. The true-up is not in the Summary Plan Description but I think it is calculated from the year-to-date amount on each payday because I see the 3% match continuing on the last few paystubs after I max-out contribution near the end of year. The 401k is with Fidelity.
Topic Author
careerdata
Posts: 332
Joined: Sat Sep 09, 2017 7:12 pm

Re: Sharing Your Experience with a 401(k) True-Up Match

Post by careerdata »

N.Y.Cab wrote: Sun Jan 23, 2022 12:10 pm My company match 50% of contribution up to 6%. The true-up is not in the Summary Plan Description but I think it is calculated from the year-to-date amount on each payday because I see the 3% match continuing on the last few paystubs after I max-out contribution near the end of year. The 401k is with Fidelity.
Thank you for sharing! That is very interesting that it is continuing over several payrolls as the one I set up with Vanguard was created from a one-time calculation after all the plan year employee contributions and eligible 401(k) earnings were known. Since the match is showing up on your paystubs over several payrolls it sounds to me like perhaps your payroll system has a method of doing the true-up match calculation. I was using PeopleSoft for payroll and benefits at that time and that was not an option available to me but perhaps this has been added to the offering since then. Do you know by chance what system your employer uses for payroll?

Regards,

Joe
ilisira
Posts: 130
Joined: Tue Mar 11, 2008 3:04 pm

Re: Sharing Your Experience with a 401(k) True-Up Match

Post by ilisira »

This is the first year I will need a true up match as well, as I am going for a Mega backdoor Roth, and our plan only starts after tax contributions once before tax contribution space is full, which means there will be many months where I will not be contributing before tax, and my company only matches them.

To my surprise, our benefits team had prepared a spreadsheet (plan is administered by Schwab), which has rows for before tax/Roth/after tax contributions for each paycheck, percentage one is contributing for each paycheck, and annual salary (and salary increase, which month, etc). Once I entered my salary, the contribution percentages, the spreadsheet showed how much company will match, and how much space I am leaving by using after tax contributions, and how much company will share at the end of current year (January of following year). This was a great tool, and I do not know what triggered for them to create such a spreadsheet, and I hope every company does this.
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Svensk Anga
Posts: 1612
Joined: Sun Dec 23, 2012 4:16 pm

Re: Sharing Your Experience with a 401(k) True-Up Match

Post by Svensk Anga »

It's been a while, but the one time I needed the true-up, I think it was paid in March. We got 1 for 1 on the first 3% plus half match on the next 3%. The true up was 4.5% of full year gross plus bonus, less previous match. Custodian was Vanguard. I don't recall any communication. I just watched for the deposit.
Afty
Posts: 2390
Joined: Sun Sep 07, 2014 5:31 pm

Re: Sharing Your Experience with a 401(k) True-Up Match

Post by Afty »

The last two places I’ve worked have matched 50% of contributions, which means you could max your 401(k) with your first paycheck and get it matched immediately, no true up needed. It’s a nice perk for those of us who like to front load.
Tamales
Posts: 1644
Joined: Sat Jul 05, 2014 10:47 am

Re: Sharing Your Experience with a 401(k) True-Up Match

Post by Tamales »

My employer matches 5% of base pay plus bonuses. To true up, they take the cumulative numbers from the 12/31 paystub: total base pay plus bonuses for the year (so it incorporates any raises during the year, as well as the variable bonuses that depend on company metrics), times 5%. Then they subtract off the match amounts the company has already paid during the year and the result is the true-up amount. I'm expecting to see it credited this coming week, so I can pre-calculate what I think it should be, based on my 12/31 pay stub cumulative numbers.

During the year, the company match per paycheck is 5% of the gross pay on that check (unless you contributed less than 5%, in which case they just match the amount you contributed). If the employee contributes more than 5% per paycheck and hits the max 401k contribution in the middle of the year, company matches stop at that point (there's nothing to match since you're no longer contributing) and you have to wait for the true-up to get your 5% total.
tony_roach
Posts: 141
Joined: Sun Nov 19, 2017 1:05 pm

Re: Sharing Your Experience with a 401(k) True-Up Match

Post by tony_roach »

-My company matches dollar-for-dollar on the first 6%.

-Our plan's true-up helps employees receive the maximum match which typically applies if you change your contribution percentage during the year or if you front load the amount you contribute to the plan.

-True-up contribution usually deposited during beginning of March the following year.
sparksfly
Posts: 106
Joined: Mon Oct 16, 2017 9:57 pm

Re: Sharing Your Experience with a 401(k) True-Up Match

Post by sparksfly »

My employer matches dollar for dollar up to 6% of base + bonus. Our pay dates are 6th and 21st on month. So, after 12/21 paycheck, the total base + bonus match is calculated and any true-up is deposited before 12/31. This year it was on 12/28
sparksfly
Posts: 106
Joined: Mon Oct 16, 2017 9:57 pm

Re: Sharing Your Experience with a 401(k) True-Up Match

Post by sparksfly »

My employer matches dollar for dollar up to 6% of base + bonus. Our pay dates are 6th and 21st of the month. So, after 12/21 paycheck, the total base + bonus match is calculated and any true-up is deposited before 12/31. This year it was on 12/28
Colorado14
Posts: 1792
Joined: Thu Apr 07, 2011 4:58 pm
Location: Colorado

Re: Sharing Your Experience with a 401(k) True-Up Match

Post by Colorado14 »

My employer provides a 6% match up to the IRS limit for those 49 years old and younger. For those of us who are 50 and older, we do not receive a match or a true up on on catch-up contributions. Our true up is paid at the end of each quarter.
sc9182
Posts: 2180
Joined: Wed Aug 17, 2016 7:43 pm

Re: Sharing Your Experience with a 401(k) True-Up Match

Post by sc9182 »

The best way to protect the "employer-match" is -- plan your contributions decently spread thru to end of the year to capture maximum match at each paycheck/interval (its hard to do this for everyone - especially if you have one-off items such as RSUs, bonus, variable-pay, or deferred-comp etc..).

As you can see - there are 'that many' ways (or the lack of) to pay (or to avoid paying) true-up matches by Employers. We've personally had 3 employers change True-up policies (mostly, in the Employer's own favor) over our careers. There are no rules/regulations around True-ups .. careful - to each their own.
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