What Is a 401(k) True-Up, and Why Did Your Match Jump?
If your 401(k) match fell short during the year, a true-up contribution, often paid the following February, is designed to make up the difference automatically.
Two months. That is roughly how long after the calendar year ends that some employers have to fix a shortfall in your 401(k) match, a shortfall you may not even know exists yet.
It is called a true-up, and it shows up as an unscheduled deposit in January or February with no paycheck attached to it. For employees who front-load their retirement contributions or get an irregular bonus, it can mean hundreds or thousands of dollars arriving months after the fact. For everyone else, it is worth understanding before you accidentally leave money on the table.
How the mismatch happens in the first place
Most 401(k) plans promise to match a percentage of what an employee contributes, often dollar-for-dollar up to a set share of salary. The catch is in how that promise gets calculated. Some plans check the match on an annual basis but actually fund it every payroll cycle, which is administratively simpler and better for company cash flow. That convenience creates a gap whenever an employee's contribution rate is not perfectly steady across all 24 or 26 pay periods in a year.
Betterment, which administers workplace retirement plans, lays out the arithmetic with a specific case: an employee earning $120,000 a year, paid twice a month, whose company matches dollar-for-dollar on the first 4% of pay. Contribute steadily all year at that rate and the math is clean: $4,800 from the employee, $4,800 from the employer, matched every single pay period. Front-load contributions instead, and the numbers stop lining up.
What is a 401(k) true-up?
A true-up is the reconciliation employers run once a full plan year is in the books: compare what the match should have been on an annualized basis against what was actually funded pay period by pay period, then deposit the difference. It is not a bonus and it is not optional generosity: for plans whose documents specify an annual match calculation, it is a compliance requirement.
Two situations trigger it most often. The first is hitting the annual contribution limit early, which stops both employee contributions and, in a per-pay-period system, the matching money that rides along with them. The second is irregular contributions: an employee who contributes heavily in one or two months and little the rest of the year, so the employer's per-paycheck match badly undershoots what an annual calculation would owe.
Do all 401(k) plans offer a true-up?
No. Plans that calculate and fund the match strictly by pay period, no contribution that month, no match that month, generally are not required to true anything up later, because there is no annual promise to reconcile against. Whether your plan does true-ups is written into the plan document, not left to employer discretion in the moment. According to the law firm Verrill, which advises retirement plan sponsors, employers weighing whether to "true up or not true up" have to build the choice into that document ahead of time, not retrofit it after a plan year is over.
When does the true-up money actually arrive?
Betterment notes true-up contributions are "normally completed within the first two months following the plan year end and before the company's tax filing deadline," which is why a true-up deposit can look, to an unsuspecting employee checking their 401(k) app in February, like a clerical error rather than money they are owed.
The people most likely to see a true-up land are not necessarily the ones maximizing tax efficiency on purpose. Senior employees with year-end bonuses, workers who get a raise partway through the year, and anyone deliberately front-loading contributions to invest earlier in the year are the most common beneficiaries, and, per Betterment, the reason some employers are reluctant to switch their whole plan over to simpler per-pay-period matching in the first place.
None of this requires you to do anything differently with your own contribution strategy. If your plan document promises an annual match, front-loading your contributions to invest more of the year's money earlier is not a mistake that costs you your match. The true-up exists specifically so it doesn't. The only real risk is at a plan that calculates matches strictly per pay period, where maxing out early can genuinely mean forfeiting months of match money nobody is coming back to add later. Check your plan's summary description, or just ask HR whether the match is calculated "annualized" or "per pay period," before you decide how aggressively to front-load next year's contributions.
