Matching safe harbor plans - true up at year end ?

[Guest rffahey]

I have a matching safe harbor plan - 100% on the first 3% and then 50% on the next 2%. The TPA said that I have to true up the contributions based on annual deferrals and annual compensation at year end.

Question: Is this how most of your plans are done in your firm ? Is it possible to only match as you go per pay period without the year end true up ? Which is better ?

[R. Butler]

Is this how most of your plans are done in your firm ?

It varies.

Is it possible to only match as you go per pay period without the year end true up ?

Its possible, but you need to look at the options in your document.

Which is better ?

It depends. Its cheaper to match on a payroll basis, however, more difficult for anyone to verify your match. Most of our clients calculate & remit their own 401(k) & match contributions. We will not check match calculations for any plan that matches on a payroll basis. It requires us to collect too much data. We have clients are satisifed they can handle it properly & they match on a payroll basis. We have other clients that are uncomfortable relying on their own calculations & those clients match based on plan year comp.

[Tom Poje]

you have to follow the terms of the document, and yes, the document can say match every pay period so no true up is needed.

Is one method favorable over another?

guess that depends. If an ee defers nothing the first 6 months and then defers 10% the last 6 months you would have a true up at the end of the year. on the other hand if you match per payroll only, then he suffers the consequences for not deferring all year.

on the other, consider Mr. Mega Bucks he who socks away $14,000 in deferral the first month. he would not get a match the rest of the year. these people need to realize not to defer so much so fast if there is not a true up.