The 401(k) Match True-Up to Help Employees Get the Full Match

Posted on Feb 15, 2026

Matching contributions are one of the most valuable benefits in a 401(k) plan — and employees often plan their savings strategy around getting the full match. But there’s an overlooked detail in many plans that can unintentionally reduce the match for certain participants: how the match is calculated during the year.

If you’ve ever heard an employee say, “I maxed out my 401(k), so why didn’t I receive the full match?” this article is for you. A year-end match true-up can solve the problem, improve fairness, and support retention — without changing your match formula.

Why employees can miss out on the full match

Most employer match formulas are applied on a per-pay-period basis. That means the match is calculated each payroll, based on the employee’s deferrals from that check. If an employee doesn’t contribute during a pay period, they generally don’t receive a match for that pay period — even if they contributed heavily earlier in the year.

This shows up most often when an employee:

• Front-loads contributions (contributes aggressively early in the year and then stops after reaching an annual limit).

• Has uneven pay (large bonuses, commissions, or seasonal overtime).

• Changes deferral rates mid-year (for example, increasing deferrals later to “catch up”).

• Takes a leave of absence or experiences gaps in pay.

None of this means the plan is “wrong.” It simply means the match is being applied as written — and the result can surprise participants who assumed the match was based on their annual contribution level.

What is a 401(k) match true-up?

A true-up is an additional employer matching contribution (usually made after year-end) that reconciles what an employee should have received based on their full-year compensation and deferrals versus what they actually received during the year under a per-pay-period match.

Think of it as a “make-whole” contribution. The employer keeps the same match formula, but at the end of the year you run a simple comparison:

• Match earned based on full-year compensation and deferrals

• Minus match already contributed during the year

• Equals the true-up amount (if any)

A quick example

Assume your plan matches 100% of the first 4% of pay an employee defers, calculated each payroll.

• Employee earns $60,000 per year.

• The maximum match available for the year is 4% of $60,000 = $2,400.

• The employee contributes enough to reach the annual deferral limit by mid-year and then stops deferring.

Because the employee stops contributing for the remainder of the year, the per-pay-period match stops too. Without a true-up, they may receive only part of the $2,400 match they expected — not because they didn’t save enough, but because the timing of their savings didn’t line up with the payroll-based match calculation.

With a year-end true-up, the plan can contribute the difference so the employee receives the full match based on their annual compensation and total deferrals.

Who benefits most from a true-up?

True-ups tend to have the biggest impact for employees who are motivated and financially able to save aggressively — often your most engaged participants. These can include:

• Employees who aim to max out their deferrals every year.

• Owners and key employees with higher deferral rates.

• Participants with significant variable compensation (bonuses/commissions).

• Employees who adjust deferrals due to life events (new baby, home purchase, etc.).

From an employer perspective, a true-up can support equity in the benefit, reinforce the value of the plan, and reduce “match confusion” that can lead to employee frustration.

Plan sponsor considerations before adding a true-up

A true-up is a plan design decision. Before implementing one, it’s important to evaluate the operational and cost impacts. Here are the key questions we recommend plan sponsors consider:

• Does the plan document allow it? Some plans are written to calculate match strictly per payroll. A true-up may require an amendment.

• How is “compensation” defined for match purposes? If bonuses are included (or excluded), that affects the true-up calculation.

• When will the true-up be funded? Many employers fund true-ups after year-end when payroll is finalized — often alongside profit-sharing contributions.

• What data is needed? Accurate year-end payroll, deferral, and compensation data is essential. Your payroll provider, recordkeeper, and TPA should be aligned.

• What is the budget impact? True-ups can increase employer contributions in certain years, especially if you have many employees who front-load contributions.

When implemented thoughtfully, a true-up can be a relatively small adjustment that meaningfully improves participant outcomes.

How to communicate a true-up to employees

If you add (or already have) a true-up feature, clear communication matters. Employees may not see the additional match until after year-end, so consider proactively explaining:

• How your match is calculated (per payroll vs. annual).

• When a true-up is determined and when it is deposited.

• Why they might not see the full match immediately if they stop deferring mid-year.

Even for employees who don’t front-load contributions, transparency builds trust and encourages engagement with the plan.

How TPS Group can help

As a Third Party Administrator, TPS Group can review your current match formula and plan provisions, help you evaluate whether a true-up aligns with your goals, and coordinate the operational details needed to support accurate year-end calculations.

If you’re hearing questions about “missing match” or you want to enhance plan design without increasing complexity for employees, a match true-up may be worth exploring.

This material is provided for informational purposes only, and is not intended as authoritative guidance, legal advice, or assurance of compliance with state and federal regulations.