A 401(k) true-up is a makeup contribution your employer deposits after the plan year ends to close the gap between the matching dollars you actually received paycheck by paycheck and the full match you earned based on your annual pay. The gap opens up because most payroll systems calculate the employer match one pay period at a time, which shortchanges anyone who hits the IRS elective deferral limit before December. For 2026, that limit is $24,500, and once you reach it, your contributions stop and so does the match tied to them.1Internal Revenue Service. Retirement Topics – Contributions The true-up recalculates what you should have earned across the full twelve months and deposits the difference as a lump sum.
Why the Match Falls Short in the First Place
Most plans apply the matching formula each paycheck. The system reads how much you deferred that period, applies the formula, and deposits the employer’s share. That works fine if you contribute the same percentage every pay period from January through December. It breaks down when you front-load your contributions or receive a big bonus that shoves you over the annual limit early.
Say your plan matches 50 cents on the dollar up to 6% of pay, and you earn $120,000 a year on a biweekly schedule. Contribute 6% each paycheck and your employer matches 3% each paycheck. By December you’ve collected the full $3,600 (3% of $120,000). No issue.
Now bump your deferral to 20% because you want to max the $24,500 limit fast. At roughly $4,615 per biweekly check, you hit the cap around your eleventh paycheck in late May. Your contributions stop. Because the match is triggered by your deferral, the match stops too. From June through December, zero additional match dollars, even though you still have half a year of salary coming. Over those eleven pay periods the match might total around $1,650 instead of the $3,600 you would have earned on full-year pay. That missing $1,950 is real money left behind.
This catches employees who receive large bonuses, commissions, or equity vests and elect to defer a big chunk. It also catches anyone who simply prefers to save aggressively early in the year and coast later.
How the True-Up Is Calculated
The formula is simple. After the plan year closes and payroll data is final, the plan administrator runs two numbers:
- Full-year match. Apply the matching formula to your total annual compensation. In the example above, 50% of 6% of $120,000 = $3,600.
- Match already received. Add up every match deposit made during the year through regular payroll. In our example, $1,650.
The true-up is the difference. $3,600 minus $1,650 = $1,950, deposited into your 401(k) as a single lump sum. An employee who spread contributions evenly and already collected the full $3,600 during the year gets a true-up of zero. The point is to put everyone in the same position regardless of when they contributed.
One wrinkle: the plan document defines which pay counts as “compensation” for matching purposes. Some plans exclude bonuses, overtime, or commissions. Others include everything. The true-up has to use the same definition the plan uses for regular matching.2Internal Revenue Service. 401(k) Plan Fix-it Guide – You Didn’t Use the Plan Definition of Compensation Correctly for All Deferrals and Allocations If your plan excludes bonuses from the matching formula, the true-up won’t factor in that portion of your pay either.
Catch-Up Contributions Widen the Gap
Employees 50 and older can defer an extra $8,000 in 2026 on top of the standard $24,500 limit, for a total of $32,500.3Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500 Employees aged 60 through 63 get a larger catch-up of $11,250, pushing the ceiling to $35,750. The higher your deferral limit, the earlier you can max out if you front-load, and the more pay periods you go without match deposits. For a 62-year-old earning $200,000 who maxes out by midsummer, the missed match can easily exceed $3,000.
Starting in 2026, employees who earned more than $150,000 in FICA wages the prior year must make any catch-up contributions on a Roth basis. That changes the tax treatment of your deferrals but not the true-up itself. True-ups are employer contributions, so they go in pretax regardless of whether your own deferrals were traditional or Roth.
When the True-Up Actually Gets Deposited
No single legally mandated date governs true-up deposits, but two practical deadlines drive the timing. The plan document usually specifies when the employer will reconcile and fund the true-up, and most aim to finish within the first quarter after the plan year ends, once W-2 data is final.
Employers also want the tax deduction. Matching contributions, including true-ups, are deductible for the prior tax year as long as they’re deposited by the due date of the employer’s federal tax return, including extensions.4Internal Revenue Service. Issue Snapshot – Deductibility of Employer Contributions to a 401(k) Plan Made After the End of the Tax Year For a calendar-year C corporation, that extended deadline can reach October 15. For S corporations and partnerships, it’s typically September 15 with extensions. Most employers don’t wait that long because they want clean books and prefer to close out prior-year plan obligations early.
How to Find Out If Your Plan Has a True-Up
Not every 401(k) plan includes one. ERISA sets minimum standards for retirement plans, but it doesn’t require an employer match at all, let alone a true-up provision.5U.S. Department of Labor. FAQs About Retirement Plans and ERISA The true-up is an optional plan design feature, and the only way to know is to check.
Start with your Summary Plan Description, the document your employer is required to give you. Search the matching contribution section for “true-up,” “annual reconciliation,” or “year-end adjustment.” If the SPD isn’t clear, ask HR or benefits directly. You can also contact the plan’s third-party administrator, whose name appears on your quarterly account statements.
Check this before you set your contribution strategy for the year. If your plan doesn’t offer a true-up and you plan to front-load, you could be giving up thousands in employer match without knowing it.
What to Do If Your Plan Doesn’t Have One
With no true-up, the only way to capture every match dollar is to spread your deferrals across all pay periods so you’re still contributing in December. Divide the annual deferral limit by the number of paychecks you receive, then set your deferral as a flat dollar amount per paycheck rather than a percentage.
For 2026, an employee paid biweekly (26 pay periods) who wants to defer the full $24,500 would contribute about $942 per paycheck. Someone paid semimonthly (24 pay periods) would contribute about $1,021. Make sure you’re still deferring at least enough each pay period to trigger the full match under your plan’s formula.1Internal Revenue Service. Retirement Topics – Contributions
Some payroll systems have a “maximize” or “auto-stop” feature that hits the IRS limit on your last eligible paycheck without going over. Use it carefully. Some versions load all remaining room into one paycheck and leave you with zero deferrals, and zero match, for the rest of the year. An even dollar amount that naturally exhausts the limit on your final December paycheck is safer.
Limits That Can Cap or Erase a True-Up
Even when your plan offers a true-up, three ceilings can shrink or forfeit what actually lands in your account.
- Annual additions limit. For 2026, all contributions combined, your deferrals, the employer match, any profit-sharing, and the true-up, cannot exceed $72,000, or $80,000 if you’re 60 to 63 and making enhanced catch-up contributions. Highly compensated employees with generous profit-sharing plans could bump into this.6Internal Revenue Service. COLA Increases for Dollar Limitations on Benefits and Contributions
- Compensation cap. Plans can only consider the first $360,000 of your annual pay for contribution calculations in 2026. If you earn $500,000 and your plan matches 50% of the first 6% of pay, the match is based on $360,000, not $500,000. The true-up uses the same capped figure.6Internal Revenue Service. COLA Increases for Dollar Limitations on Benefits and Contributions
- Vesting. True-up deposits are employer contributions and follow whatever vesting schedule applies to the plan’s regular match. If your plan uses a three-year cliff and you leave after two, you forfeit the true-up along with all other unvested match dollars. Check your vesting status before counting on it as guaranteed money.