True-up Clause for 401(k) Plan
(Matching Contributions)


Summary

This template is a true-up clause that can be used in a 401(k) plan offering employer matching contributions. When matching on a payroll or monthly basis, 401(k) plans can cause participants to miss out on the plan's maximum employer match. True-up clauses make up for lost employer matching contributions. This template includes practical guidance, drafting notes, and an alternate clause. Many 401(k) plans allocate (and deposit in trust) employer matching contributions on a per-paycheck formula, often even reflecting the amount of the match plan allocation on the employee's paystub. For example, a matching provision indicating "the definition of Pay shall apply separately for each payroll period." Is not uncommon. However, this can cause a participating employee to miss out on matching contributions. A typical 401(k) matching formula is one where an employer matching contribution equals 50% of the participant's paycheck contribution (referencing the plan's definition of plan ...