Is there a Match True up? Which comp to use?

[jmartin]

Please consider the following facts:

• We have a new plan. Safe Harbor Match
• Calendar year plan. 2019 is the first year. Effective date 1/1/19
• Effective Date for 401k and SH Match is 5/1/19
• Plan does not exclude pre-participation wages (so full year)
• Adoption Agreement indicates match is allocated at end of plan year
• The underlying plan document seems to talk about match true up being "optional"

 

The question is does this plan need a match true up? Is it optional and the client can choose not to make it if they wish. IF they do, or if it is required,  what wages do we base the true up on? Do we use wages for the entire year or wages only since 5/1?

 

Below is the wording from our plan doc on match true ups...

 

MATCHING CONTRIBUTIONS
(a) Amount of Matching Contributions. Subject to the limitations described in Article 5, the Company shall contribute
to the Plan an amount specified in the Adoption Agreement on behalf of each Participant who made a Matched Employee
Contribution and who has completed any service requirements specified in the Adoption Agreement. Notwithstanding the foregoing,
a Participant shall be eligible to receive an allocation of Matching Contributions only to the extent such contributions are permitted in
the Adoption Agreement.
(b) Contribution and Allocation of Matching Contributions. Matching Contributions shall be made to the Plan and
promptly allocated to the Matching Contribution Accounts of Participants who meet the requirements of Subsection (a) and in the
amount determined pursuant to Subsection (a) as soon as administratively feasible after the end of the periods described in the
Adoption Agreement.
(1) The Company may make an additional Matching Contribution ("true up") on behalf of each Participant in
the amount of the positive difference, if any, between the Matching Contributions that would have been allocated to his Account had
such contributions been determined on the basis of Compensation for the entire Plan Year and the Matching Contributions previously
allocated to such Participant's Account.
 

 

[Luke Bailey]

jmartinrps, you say that the match is allocated at end of year. A true-up usually occurs in plans that have payroll-by-payroll matching, and compensates for participants' who have a nonuniform elective deferral pattern who would otherwise get a  lower match for the year than someone who contributed evenly throughout the year, because sometimes they contributed more than the maximum that gets matched for a payroll period, and sometimes less. So is this really a true-up? The true-up language you quote is discretionary. Why exercise the discretion?