Match True up

[Guest susanward]

I am looking to determine what the industry standard is regarding a match true up calculation within a 401k plan. We have a client who recently implemented an annual match True Up. The eligibility requirements for match is one year of service and 1000 hours. It is a retail company who has issues with payroll adjustments not being input in a timely manner. They are telling us that we could see adjustments from up to two years ago. They are leaning towards making a participant "un-match" eligible if an adjustment comes through which occured prior to the one year anniversary date. For example, an employee is deemed match eligible on their one year anniversary date of 7/1/02 with 1000 hours. On 9/27/02 we receive an adjustment of negative 50 hours with a payroll period end date of 6/15/02. Although the participant appeared to have 1000 hours on their anniversary date, this adjustment to hours would mean they truly were not eligible. In this instance, our client wants to go back and make this participant ineligible for match as of 7/1/02 and they want to back out all of the match contributions that were contributed in error. I am trying to determine the industry standard practice in this situation. Do most plans operate under the "once eligible always eligible" rule? How do other plans who offer true up handle adjustments to payroll?

[austin3515]

The most practical answer I can give is only contribute the match once a year once you've absolutely determined who is eligible.

I suspect most employees would have a hard time understanding why one day a match was there and the next day it was gone.