What is a ‘true up’?
If your plan has a non-elective safe harbor contribution, this means that all eligible employees are due to receive a contribution equal to a certain percentage of their annual compensation (as defined in your plan’s Adoption Agreement).
If you deposit the safe harbor contributions each payroll period, you may be surprised to learn that additional mandatory contributions sometimes need to be added to make your plan whole; these contributions are called ‘true-ups.’
True-ups can occur for the following reasons:
- Employees who become eligible mid-year would not have received any contributions prior to becoming eligible.
- Gross up earnings on W2 at year-end that aren’t captured during ongoing payrolls.
- General errors in depositing the contributions throughout the year.
What can I expect?
After Vestwell completes the Compliance Package, a true-up report will be uploaded to the sponsor portal for your review along with an off-cycle Excel file to make it easy to submit your off-cycle contribution. Keep in mind that if you also requested profit sharing, that may be on the Excel file as well, so please review it closely before initiating the contribution.