When do true-up employer 401k contributions occur?

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notmyhand
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When do true-up employer 401k contributions occur?

Post by notmyhand » Sat Dec 30, 2017 1:45 pm

The company changed their policy and said they would do true-up employer 401k contributions at the end of the year. It's the 30th and I'm still not seeing mine. Is it common for these to occur after the new year or do they have to occur by 12/31? I don't want to be that employee if it's not something to worry about.

Thank you!

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samsoes
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Re: When do true-up employer 401k contributions occur?

Post by samsoes » Sat Dec 30, 2017 1:49 pm

My Megacorp does them in late January.
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dcabler
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Re: When do true-up employer 401k contributions occur?

Post by dcabler » Sat Dec 30, 2017 1:49 pm

Every company I've ever worked for does it in Q1 of the following year, generally in the March timeframe. The downside is that you have to still be employed at the company at that time in order to receive the true-up. It's a risk I take because I front-load my 401K withdrawals at the absolute max since my industry historically has layoffs later in the year.

Daryl
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Re: When do true-up employer 401k contributions occur?

Post by Daryl » Sat Dec 30, 2017 1:51 pm

My megacorp posts the true-up in March/April of the following year, around the same time that bonuses are paid.

lostinjersey
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Re: When do true-up employer 401k contributions occur?

Post by lostinjersey » Sat Dec 30, 2017 2:04 pm

They can’t be done until after the year ends and they determine who actually needs a trueup.

If it’s a C Corp they will typically be completed by March 15 (on a calendar year plan) so the company can deduct on their tax return. S Corp/sole proprietor have an additional month to deposit. Usually you see them shortly after the year ends, maybe 30-45 days for the admin processing to be completed.

MrJones
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Re: When do true-up employer 401k contributions occur?

Post by MrJones » Sat Dec 30, 2017 2:07 pm

Would someone mind telling me what a true up is? I received one too in March, and my assumption has been that it is got to do with the fact that I don't spread my contributions but contribute in a lump sum and therefore don't receive an adequate employer match, which the true up compensates for. Is this correct?

Spirit Rider
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Re: When do true-up employer 401k contributions occur?

Post by Spirit Rider » Sat Dec 30, 2017 2:08 pm

They are employer contributions, they actually have until their tax filing due date including extensions. Although most do it by the due date without extensions.

lostinjersey
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Re: When do true-up employer 401k contributions occur?

Post by lostinjersey » Sat Dec 30, 2017 2:13 pm

MrJones wrote:
Sat Dec 30, 2017 2:07 pm
Would someone mind telling me what a true up is? I received one too in March, and my assumption has been that it is got to do with the fact that I don't spread my contributions but contribute in a lump sum and therefore don't receive an adequate employer match, which the true up compensates for. Is this correct?
Yep. The true-up is to make you 'whole' for any match you missed on a per-payroll basis, taking into account your contributions on an annual basis.

So, if your company matches 100% of the first 10% of pay you defer, and you defer 20% the first 6 months and 0% the second six months, you only got half the match you're entitled to if you get matched on a per-payroll basis. The true-up will look at your annual deferral and match %, say yes, MrJones hit 10% for the year but only got 5% annual match, and give you the remaining match you're entitled to.

livesoft
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Re: When do true-up employer 401k contributions occur?

Post by livesoft » Sat Dec 30, 2017 2:15 pm

I've received a true-up 18 months after the end of the year. :)
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Tamales
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Re: When do true-up employer 401k contributions occur?

Post by Tamales » Sat Dec 30, 2017 2:24 pm

I wonder why employers (who are always looking to simplify accounting and payroll) don't just do a single lump contribution by Q1 of the following year, and nothing else during the year. They have to run those final year-end numbers anyway.

ERISA Stone
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Re: When do true-up employer 401k contributions occur?

Post by ERISA Stone » Sat Dec 30, 2017 2:29 pm

dcabler wrote:
Sat Dec 30, 2017 1:49 pm
The downside is that you have to still be employed at the company at that time in order to receive the true-up. It's a risk I take because I front-load my 401K withdrawals at the absolute max since my industry historically has layoffs later in the year.
This is not accurate. Assuming a calendar year plan, if you have met contribution allocation requirements at 12/31, you should receive the contribution, even if you terminate on 1/1 of the following year (I would argue even if you terminate 12/31, and so would some auditors I know). It is not possible to design a qualified retirement plan to have requirements to meet AFTER the end of the plan year.

notmyhand
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Re: When do true-up employer 401k contributions occur?

Post by notmyhand » Sat Dec 30, 2017 2:38 pm

Thanks everyone! Glad I didn't bother HR about it! :D

Spirit Rider
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Re: When do true-up employer 401k contributions occur?

Post by Spirit Rider » Sat Dec 30, 2017 4:52 pm

livesoft wrote:
Sat Dec 30, 2017 2:15 pm
I've received a true-up 18 months after the end of the year. :)
That is possible, but the company would not be able to deduct those contributions. Not something a company would generally choose to do.

MrJones
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Re: When do true-up employer 401k contributions occur?

Post by MrJones » Sun Dec 31, 2017 1:20 pm

lostinjersey wrote:
Sat Dec 30, 2017 2:13 pm
Yep. The true-up is to make you 'whole' for any match you missed on a per-payroll basis, taking into account your contributions on an annual basis.
Thanks a bunch for the explanation and example!

OP, sorry for the slight derailing of your thread.

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gunn_show
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Re: When do true-up employer 401k contributions occur?

Post by gunn_show » Sun Dec 31, 2017 3:02 pm

Tamales wrote:
Sat Dec 30, 2017 2:24 pm
I wonder why employers (who are always looking to simplify accounting and payroll) don't just do a single lump contribution by Q1 of the following year, and nothing else during the year. They have to run those final year-end numbers anyway.
My employer does this, as a % of total comp, in Jan/Feb after year end. Certainly makes it easier, but I would rather have it DCA'd throughout the year to be honest, as you miss an entire year's gains waiting for that lump sum (as well as having to be employed all the way till the end). But I guess the inverse is you could get a larger % after a gangbusters year by the company.
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