Is it possible to make a true-up contribution in a plan with a payroll by payroll computation period?

[Zach Del]

This is a discretionary match that was paid throughout the plan year. The plan document states the match computation period is payroll by payroll. My understanding is that the computation period dictates the mathematical components used to determine each participant’s matching contribution. If the computation period is each pay period, then the formula is applied to deferrals/compensation earned only during that specific payroll period. Therefore, a true-up would only be applicable in a plan where the match computation period is annual (regardless if the match was actually PAID per payroll or annually). So the question is whether the true-up is possible with a per payroll computation period, and also does a true up provision need to be included in the plan document? I'm not sure if the mechanism is simply implied by the choice of computation period, or if it needs to be explicitly stated. 

What makes the situation even more confusing (and concerning), is that the plan document includes a last-day rule as a condition for receiving match contributions. Isn't the plan in operational failure if they fail to forfeit/refund all of the match paid to the employees during the year? 

Additionally, the employer wants to exclude terminated employees from their hypothetical true-up. I don't see how they can exclude them from a true-up (if they can make the true-up), without also acknowledging that they are not entitled to any match accrued during the plan year.

As you can see, a lot of red flags here and a few inconsistencies with the plan document. Any guidance would be appreciated.

[WCC]

1 hour ago, Zach Del said:

So the question is whether the true-up is possible with a per payroll computation period

No, not unless the document says otherwise.

1 hour ago, Zach Del said:

and also does a true up provision need to be included in the plan document?

Yes

1 hour ago, Zach Del said:

Isn't the plan in operational failure if they fail to forfeit/refund all of the match paid to the employees during the year? 

Yes

1 hour ago, Zach Del said:

Additionally, the employer wants to exclude terminated employees from their hypothetical true-up. I don't see how they can exclude them from a true-up (if they can make the true-up), without also acknowledging that they are not entitled to any match accrued during the plan year.

Agree, terminated participants are not eligible for the match and/or true up if they have a last day allocation condition. Be sure to check the document as it may provide an exception to the allocation conditions for termination due to death, disability or retirement. A pay period match with a last day rule is a poorly designed plan. 

[Bri]

and if they want a true-up, it's easy enough to code software to do it on a recurring basis every week using "year-to-date minus prior" or your system's equivalent language.

[Paul I]

I have seen a plan that pretty much has all of these provisions including the last day rule, and it had a 1000 hour rule.  Administratively, the match throughout the year was accounted for separately and allowed participants the ability to direct the investments.  If the employee reached the end of the year without meeting all of the plan provisions, the year's match account was taken away and used to offset the matching contributions beginning with the next year (much like a match forfeiture account).

It was not the best plan design from the standpoint of employee relations.

[Bird]

12 hours ago, Paul I said:

I have seen a plan that pretty much has all of these provisions including the last day rule, and it had a 1000 hour rule.  Administratively, the match throughout the year was accounted for separately and allowed participants the ability to direct the investments.  If the employee reached the end of the year without meeting all of the plan provisions, the year's match account was taken away and used to offset the matching contributions beginning with the next year (much like a match forfeiture account).

It was not the best plan design from the standpoint of employee relations.

Yeah and it's not really a forfeiture is it, more or of an "oops" contribution. That's a mess.

[Paul I]

Calling it a mess is being polite.