What a 401(k) true-up actually does

A true-up reconciles employer match calculated during payroll with the match required by an annual plan formula. It matters when the plan document bases matching on full plan-year compensation and deferrals, but payroll deposits were calculated one paycheck at a time. The annual calculation can expose employer dollars missed earlier in the year.

Suppose a plan matches 100% of employee deferrals up to 5% of annual eligible compensation. An employee earns $120,000 and defers at least $6,000, so the annual formula produces a $6,000 match. If payroll deposited only $4,500 because contributions stopped before later checks, a $1,500 true-up can bring the total to the annual requirement.

A true-up is not an extra discretionary bonus and is not guaranteed by the phrase “employer match.” It exists only when the plan document requires annual measurement or otherwise provides the reconciliation. Some plans intentionally define match per payroll period and owe no annual true-up.

Three conditions must be kept separate

Front-loading can create the missing-match gap

An employee who contributes a high percentage early can reach the 2026 elective-deferral limit before year-end. If match is calculated every paycheck, pay earned after contributions stop generates no payroll match. An annual true-up can restore the difference when the plan requires it.

Bonuses can create a similar pattern. A large deferral from a January bonus may consume much of the annual limit, while regular salary continues through December. Contribution-rate changes, unpaid leave, a midyear raise, commissions, or a payroll cap can also make the per-period result differ from the annual formula.

Front-loading is not automatically harmful when a true-up exists, but it can delay the employer contribution and expose the participant to last-day employment conditions. Without a true-up, spreading deferrals across eligible checks can be important. This calculator diagnoses the annual gap; it does not design an optimal paycheck schedule.

2026 limits and compensation definitions

The basic 2026 employee elective-deferral limit for most 401(k) plans is $24,500. General age-50 catch-up room is $8,000, and participants attaining age 60 through 63 can have an $11,250 catch-up instead. Catch-up contributions and whether they are matched depend on plan operation. Enter actual employee deferrals rather than assuming every dollar is matchable.

The federal annual compensation limit is $360,000 for 2026. The calculator caps compensation there, but the plan’s definition can be lower. A plan may exclude bonuses, overtime, commissions, compensation before eligibility, or certain post-severance pay. Using Form W-2 wages without reading the definition can overstate a true-up.

The defined-contribution annual-additions limit is $72,000 for 2026 before special catch-up treatment. Profit-sharing and other employer contributions can use room that this single-purpose true-up calculator does not track. The plan administrator must apply all section 415 limits.

A quarter-by-quarter audit trail

Payroll records should be reconciled to the plan account, not merely to a benefits website estimate. A contribution can be deducted from pay but deposited later, corrected, refunded, or assigned to a different plan year. Keep pay statements and plan transaction history.

Example: full employee deferral but incomplete payroll match

An employee earns $120,000 of eligible compensation and contributes $24,500. The plan matches 100% of employee deferrals up to 5% of annual compensation. Five percent of compensation is $6,000, well below employee deferrals, so $6,000 is the annual formula match.

The account shows $4,500 of payroll matching contributions. If the plan provides a true-up and the employee meets year-end conditions, the estimated reconciliation is $1,500. At 100% vesting, all $1,500 is currently owned when deposited. The other $18,500 of employee deferrals remains valuable retirement savings but is outside the match ceiling.

If the plan does not provide an annual reconciliation, the calculator changes the payable result to zero while still showing the mathematical gap. That separation prevents a possible annual shortfall from being described as an amount legally owed without document support.

When a zero result is correct

No true-up is estimated when payroll deposits already equal or exceed the annual formula. An excess display does not mean the employer can automatically remove money; plan corrections, discretionary match, and allocations require administrative review. It simply means the entered annual formula does not produce an additional amount.

Zero also appears when plan true-up or eligibility is marked unconfirmed. This is a conservative payable result. The annual gap remains visible for discussion with benefits staff. A terminated employee may still qualify under one plan and fail a last-day condition under another.

Finally, an employee who did not defer enough to reach the match ceiling may receive the correct smaller annual match. A true-up reconciles timing; it does not create employee deferrals that were never made.

Rebuild the annual match from actual payroll records

The cleanest audit starts with eligible compensation and employee deferrals for every pay date. Mark bonuses, commissions, leave periods, rate changes, refunds, and checks issued before eligibility began. Then reproduce the plan’s pay-period formula and compare that total with deposits in the plan account. This separates a normal timing difference from a payroll omission.

Next, calculate the annual formula using the same compensation definition and cap. The difference between annual-formula match and deposited match is only a candidate true-up. Apply plan-year eligibility, last-day employment, hours-of-service, catch-up treatment, and any stated true-up deadline before treating it as payable. A summary plan description may describe the match generally while the formal plan document or annual notice supplies the controlling details.

Deposits can arrive after December 31 and still relate to the prior plan year, so a year-end account snapshot may be premature. Ask benefits staff when the reconciliation is normally funded and how it appears in transaction history. If the employer changes recordkeepers, retain statements from both systems because a missing opening balance can look like an unpaid match.

Employees who joined midyear should not automatically annualize pre-eligibility pay. Likewise, a plan that calculates match on each payroll and has no annual true-up can be operating as written even when the annual comparison shows a gap. The calculator keeps these concepts separate so the discussion begins with the right question: mathematical shortfall, plan entitlement, or deposit timing.

Questions employees ask about true-ups

References

Plan-document authority and matching overview: IRS 401(k) Plan Overview. 2026 contribution and compensation limits: IRS 401(k) and Profit-Sharing Plan Contribution Limits. Annual compensation true-up example: IRS Employee Plans News 2012-3.