What is a ‘true up’?
If your plan has a 3% non-elective safe harbor contribution, this means that all eligible employees are due to receive a contribution equal to 3% 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 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 who 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 and upload file will be provided to you via email for your review and approval, along with instructions on how to go about funding the contribution. If there are any questions, please reach out to the Vestwell team for assistance.