A 401(k) true-up contribution is a year-end adjustment your employer deposits to make sure the match you actually receive equals the match your plan’s annual formula promises. Most employers calculate the match paycheck by paycheck, but the formula in the plan document is usually written in annual terms. When those two methods produce different totals, the true-up closes the gap with a lump sum after the plan year ends.
Why Per-Pay-Period Matching Leaves Money on the Table
Most employers deposit matching dollars alongside each payroll run. The math is mechanical: if you defer 6% of a $4,000 paycheck and the plan matches dollar-for-dollar up to 5%, you get $200 that period. Defer 2%, the match drops to $80. Defer nothing, and there’s no match at all. The payroll system only reacts to what happens in that specific pay cycle.
The plan document usually promises something different. A typical formula reads “100% of the first 5% of annual compensation deferred.” Under an annual formula, the only question is whether your total deferrals for the year equal or exceed 5% of your total compensation. When you contributed doesn’t matter. The mismatch between the annual promise and the per-period deposits is what creates the shortfall a true-up fixes.
Two patterns commonly trigger it. The first is uneven contributions across the year: someone who defers aggressively in the first half and then scales back after a cash crunch may finish the year having deferred enough to earn the full match, but the payroll system already stopped depositing match dollars once the deferral rate dropped. The second is front-loading. A high earner who hits the IRS annual deferral limit partway through the year stops deferring, so the per-period match also stops, even though the annual formula would still owe more. For 2026, the deferral limit is $24,500, with an $8,000 catch-up if you’re 50 or older and $11,250 if you’re 60 to 63.1Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026
How the True-Up Is Calculated
After the plan year closes, the employer figures the maximum match you should have received under the annual formula, then subtracts whatever the payroll system already deposited. The difference is the true-up.
A Mid-Year Contribution Drop
Say you earn $100,000 and your plan matches 100% of the first 5% of pay. Your maximum match for the year is $5,000. You defer 10% of every paycheck for the first six months, which generates $2,500 in match (the match caps at 5% per period even though you’re deferring more). A financial emergency then forces you to drop to 1% for the rest of the year, adding another $500 in match. Payroll has deposited $3,000.
Your total deferrals for the year were $5,500, which is 5.5% of your salary, comfortably above the 5% threshold. The annual formula owes you the full $5,000. The true-up is $2,000, deposited as a lump sum after year-end.
Maxing Out Early
Now take someone earning $200,000 under the same match formula, so a maximum match of $10,000. This person defers aggressively and hits the $24,500 limit by the end of August. Through those eight months, the per-period match totals roughly $6,667. From September through December, no deferrals go in, so no match goes in either.
The annual formula doesn’t care about the timing. Total deferrals of $24,500 easily clear 5% of $200,000, so the full $10,000 is owed. The true-up is $3,333. Without it, this employee would have lost a third of the match they earned simply by funding the account faster.
When the True-Up Hits Your Account
The employer can’t run the calculation until all compensation and deferral data for the plan year is final, so the work starts after December 31 for a calendar-year plan. Most administrators finish the reconciliation in January or February and deposit the true-up shortly afterward.
The outer deadline is set by the employer’s tax return. To deduct the contribution for the prior tax year, the employer must actually deposit it before the return due date, including extensions.2Internal Revenue Service. Issue Snapshot – Deductibility of Employer Contributions to a 401(k) Plan Made After the End of the Tax Year For calendar-year S-corporations and partnerships, the extended deadline is September 15; for C-corporations, October 15. Most true-ups arrive well before those outer limits.
How to Tell If Your Plan Offers a True-Up
Not every plan has one. The true-up must be written into the plan document. A plan that defines the match strictly on a pay-period basis, with no annual reconciliation, gives the employer no authority to deposit extra match money after year-end.
The fastest check is your Summary Plan Description, the plain-language booklet your employer is required to give you. Look for how the match is described. A plan with a true-up will typically refer to “annual compensation” or “plan-year compensation” and may mention a year-end reconciliation or adjustment. A plan without one will describe the match only in per-pay-period terms. If the language isn’t clear, ask HR or your plan administrator directly.
What to Do If Your Plan Doesn’t Offer One
Without a true-up, you have to pace your deferrals to hit the match threshold in every single pay period, not just over the full year.
Work backward from the match formula. If your plan matches the first 5% of pay, you need to defer at least 5% every period. If you also want to max out the $24,500 deferral limit for 2026, calculate the deferral percentage that spreads that amount evenly across all your pay periods without hitting the ceiling before December. For someone paid biweekly (26 pay periods), that works out to roughly $942 per paycheck, or about 12.25% on a $200,000 salary. As long as the spread keeps you above the match threshold every period, you’re set.
Some recordkeepers offer an automatic feature that slows or stops your deferrals as you approach the annual limit, then restarts in January. That can prevent the premature cutoff that creates the shortfall in the first place. Ask your plan administrator whether it’s available.
Vesting, the 415 Cap, and Roth Match
A true-up is a matching contribution, so it follows the same vesting schedule as the rest of your match. If your plan uses three-year cliff vesting, the true-up is subject to the same timeline. It doesn’t create a separate vesting bucket. Leave before you’re fully vested and you forfeit the unvested portion of the true-up along with any other unvested match.
Every dollar going into your 401(k) from any source counts toward the Section 415 annual additions limit, which is $72,000 for 2026.3Internal Revenue Service. 2026 Amounts Relating to Retirement Plans and IRAs Annual additions include your deferrals, employer matching, nonelective employer contributions, and any forfeitures allocated to your account.4Office of the Law Revision Counsel. 26 USC 415 – Limitations on Benefits and Contribution Under Qualified Plans For most participants that limit never comes into play. For highly compensated employees receiving large match and profit-sharing amounts, a true-up that would push total additions past $72,000 has to be trimmed to fit.
Since 2023, the SECURE 2.0 Act has let plans offer participants the option to designate employer matching contributions as Roth.5Internal Revenue Service. SECURE 2.0 Act Changes Affect How Businesses Complete Forms W-2 If your plan adopted the feature and you elected it, a true-up would land in your Roth 401(k) instead of the pre-tax side. The calculation is the same; only the destination account changes. The tax treatment of a Roth match differs from a traditional one at the time of contribution, so check your plan’s materials before electing it.