Adding True Up Feature Mid Year

[khn]

Can a plan add a true up provision mid year? Seems like they should be able to, as it benefits participants...

[Paul I]

Yes.  Often times this happens simply (an unintentionally) as a by-product of a mid-year change to the frequency of funding the match to something other than on a payroll period basis.

[BG5150]

Is it a Safe harbor plan?

 

[FORMER ESQ.]

If its a SH plan, IRS Notice 2016-16 Section IIID applies to your facts.  You have some time, but must act.

[CuseFan]

I was thinking same thing. If a SHM then adding the true-up changes the terms of the SHM and that may not fly - but I defer to others with more expertise in this area. 

One might think this doesn't hurt anyone and only helps, but if I'm smoothing out my deferrals to make sure I get the full match and then you change the terms such that I could have frontloaded my deferrals for the year (like from a bonus) and still got the full match of 4% of my pay, then I have certainly been disadvantaged. If this is done to accommodate HCEs who actually did frontload deferrals to get them invested sooner, then I also think you have a potential discrimination issue whether plan is SHM or not, IMHO. 

[CuseFan]

2 minutes ago, FORMER ESQ. said:

IRS Notice 2016-16 Section IIID

 

1 minute ago, CuseFan said:

but I defer to others with more expertise in this area. 

 

[C. B. Zeller]

If permitted by the plan, you could make a discretionary QMAC. The formula would be the same as the safe harbor match formula, except calculated on an annual basis, and reduced by the amount of safe harbor contributions already allocated to the participant during the plan year. When you test the two matching formulas together, it still satisfies the ACP safe harbor. You would have to provide the discretionary match notice though.

[FORMER ESQ.]

1 minute ago, C. B. Zeller said:

If permitted by the plan, you could make a discretionary QMAC. The formula would be the same as the safe harbor match formula, except calculated on an annual basis, and reduced by the amount of safe harbor contributions already allocated to the participant during the plan year. When you test the two matching formulas together, it still satisfies the ACP safe harbor. You would have to provide the discretionary match notice though.

Why do this when you have time to retroactively amend (assuming the plan year end is 12/31)?

 

 

 

[C. B. Zeller]

On 9/18/2026 at 9:46 AM, FORMER ESQ. said:

Why do this when you have time to retroactively amend (assuming the plan year end is 12/31)?

If you can get the amendment and updated notice out by 9/30, then absolutely do that. The discretionary QMAC is just another option in case you miss that deadline.