Match Allocated on Payroll Basis - Stop When Participant Maxes Out on

[Christine Roberts]

This question has probably been asked and answered before, but please humour me - if a 401(k) participant maxes out his or her deferral limit early in the year - and the employer is allocating the matching contribution each payroll period, must the matching allocations stop as soon as the deferrals stop, even if the matching allocation formula would entitle the participant to more money if the deferrals took place over a longer period? Example: Employee 1 earns $170K, defers 15% or $1,062.50 per payroll period; maxes out at end of 9.88 pay periods. Matching formula is 50% up to first 6% of compensation - matching contributions total $2,100 at the time employee must stop deferrals. Employee 2 also earns $170K but defers at 6%. He receives full $5,100 matching contribution because he is not required to stop deferring, prematurely.

Presuming the plan document allows the employer to fund the match at the end of the plan year (or by applicable tax return deadline), can the employer can fund the additional matching contribution for Employee 1, after he or she must stop deferring??

[MR]

Unless the plan specifies that the match is allocated on a payroll period basis, this employer would be REQUIRED to make a "true-up" matching contribution for any participant who did not receive the match he would have if the match had been calculated at year-end, based on compensation earned and deferrals made for the entire year. Others have called it a "match patch", which is kind of growing on me.

[card]

also see this thread:

http://www.benefitslink.com/boards/index.php?showtopic=8135