Q&A of the Week June 12, 2024

Question

What is a "true-up" for 401K plans?

Answer

Some companies offer a "true-up" for 401(k) and 403(b) plans. A true-up is a provision that requires employers to make an additional deposit if the employee has yet to receive the total amount they were entitled to by year-end.

A major perk for employees, a true-up is more commonly offered with bigger plans. It is helpful for employees who max out their 401(k) or 403(b) contribution before the end of the year. When a plan does not have a true-up, employees are more likely to miss out on the full employer match for their 401(k) or 403(b).

When you set up your 401(k) or 403(b) deferrals, it's important to find out if there is a true-up. The first place to look is in the "contributions" section of your 401(k) or 403(b) plan. You can also check with your company's Human Resources department.