A true-up contribution to a 401(k) is a year-end adjustment your employer deposits to close the gap between the match you actually received paycheck by paycheck and the larger match the plan’s annual formula would produce over the full year. Most employers calculate the match every payroll run, but the plan document usually defines the maximum match against your full-year pay and full-year deferrals. When those two math methods disagree, the true-up makes you whole with a single lump sum after the plan year ends.
Why Per-Paycheck Matching Can Shortchange You
Most employers deposit matching contributions with each payroll. The system 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% and the match drops to $80. Defer nothing and the match is zero.
The plan document tells a different story. It typically defines the match in annual terms, something like “100% of the first 5% of annual compensation deferred.” Under that formula, all that matters is whether your total deferrals for the year hit 5% of your total pay. The timing doesn’t matter. That gap between the annual promise and the per-period deposits is what a true-up fixes.
Who Usually Ends Up Short
Two patterns cause the shortfall.
The first is uneven contribution rates during the year. Someone who defers heavily early and cuts back later, or contributes nothing for a stretch after a life event, ends up with paychecks that produced little or no match, even though their annual deferral total would have earned more.
The second is front-loading. A high earner who maxes out the IRS deferral limit partway through the year stops contributing, so the per-period match stops too. For 2026, the elective deferral limit is $24,500, with an additional $8,000 in catch-up available if you’re 50 or older and $11,250 if you’re between 60 and 63.1Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026 Once your deferrals stop for the year, no more match hits your account under the per-paycheck method, even though the annual formula would still owe you more.
A Worked Example
Say you earn $200,000 and the plan matches 100% of the first 5% of compensation. Your maximum annual match is $10,000. You defer aggressively and hit 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, you can’t defer anything more, so no additional match goes in.
The annual formula doesn’t care that you finished early. Your total deferrals of $24,500 easily exceed 5% of $200,000, so the plan owes the full $10,000. The true-up is $10,000 minus $6,667, or $3,333. Without it, you would have lost a third of the match you earned simply because you funded your account faster than payroll cycles allowed for.
The uneven-rate version works the same way. If you earn $100,000, defer 10% for six months and then drop to 1% for the rest of the year, your per-period match under a 5% cap comes to about $3,000. But your $5,500 in annual deferrals is more than 5% of $100,000, so the annual formula owes you the full $5,000. The true-up: $2,000.
When the True-Up Hits Your Account
The employer can’t run the calculation until every paycheck and deferral for the year is final, so the process starts after December 31 for a calendar-year plan. Most administrators finish the reconciliation in January or February and deposit shortly after.
The outer deadline is tied to the employer’s tax return. Employers can deduct matching contributions, including true-ups, for the prior tax year as long as the money is in the plan by the tax 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, that extended deadline is September 15; for C-corporations, October 15. In practice, most true-ups arrive well before those dates.
How to Find Out If Your Plan Offers One
Not every plan includes a true-up. The provision has to be written into the plan document. A plan that defines matching strictly on a per-pay-period basis gives the employer no authority to add money after year-end, no matter how big the annual shortfall.
Check your Summary Plan Description, the plain-language booklet your employer must provide. Look at how the match is described. A plan with a true-up will usually calculate the match against “annual compensation” or “plan-year compensation” and may mention a year-end reconciliation. A plan without one will describe the match only in per-paycheck terms. If the language isn’t clear, ask HR or the plan administrator directly.
What to Do If Your Plan Doesn’t Have One
Without a true-up, you have to pace contributions to capture the match in every pay period, not just over the year as a whole.
Work backward from the formula. If the plan matches the first 5% of pay, defer at least 5% every pay period. If you also want to reach the $24,500 limit for 2026, figure out the deferral percentage that spreads $24,500 evenly across all your paychecks without hitting the ceiling before December.1Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026 For someone paid biweekly across 26 periods, that’s roughly $942 per check, or about 12.25% on a $200,000 salary. As long as that percentage still clears the match threshold every period, you’re covered.
Some recordkeepers offer an automatic feature that slows or stops your deferrals as you approach the annual limit and restarts them in January. That can prevent the premature cutoff that causes front-loader shortfalls. Ask your plan administrator whether it’s available.
Vesting
A true-up is a matching contribution, so it follows the same vesting schedule as your regular match. If your plan uses a three-year cliff, the true-up is subject to it too. 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 the rest.
Roth Matching
Beginning in 2023, the SECURE 2.0 Act gave plans the option to let participants elect to have employer matching contributions treated as Roth.3Internal Revenue Service. SECURE 2.0 Act Changes Affect How Businesses Complete Forms W-2 If your plan adopted this feature and you elected it, a true-up designated as Roth lands in your Roth 401(k) account. The calculation is unchanged; only the destination account and the tax treatment differ. Not every plan has added the option, so check your plan’s materials if it matters to you.