What's the True Up Provision? 

Michael Hart | June 25, 2025

I recently spoke with a client—we’ll call him Tim—who proudly told me he was contributing 20% of his gross income into his 401(k). He was expecting me to congratulate him on his discipline. Instead, I told him it worried me.

Naturally, Tim was confused. But here’s why his strategy concerned me—and why it might concern you too.

THE BASICS
Tim is 42 years old and makes $175,000 a year. Contributing 20% of his salary means he’s on pace to put away $35,000 into his 401(k) in 2025.
But Uncle Sam only allows $23,500 in 401(k) contributions for 2025 (if you’re under 50). Exceed that limit, and you could run into some serious headaches.

PROBLEM #1: OVERCONTRIBUTION AND DOUBLE TAXATION
About half of 401(k) plans will automatically stop your contributions once you hit the IRS limit. If your plan doesn’t, you’re responsible for removing the excess—and any earnings on those excess contributions—or you risk double taxation.

Tim assured me his company will cut him off at $23,500, so we dodged that bullet.

PROBLEM #2: MISSING OUT ON EMPLOYER MATCHING CONTRIBUTIONS

This is where things got tricky.

Tim’s employer offers a 50% match on the first 8% of his salary—that’s potentially $7,000 of free money every year.
But Tim was front-loading his contributions. At $1,346.68 every two weeks, he’ll hit the IRS cap after 17 pay periods, leaving 9 pay periods where he’s no longer contributing—and no longer receiving any employer match.

Why? Because Tim’s plan doesn’t have a “true-up” provision.

WHAT’S A TRUE-UP PROVISION?
A true-up is a feature in some 401(k) plans that ensures you get your full employer match at year-end, even if you contribute unevenly throughout the year.

Without it, if you stop contributing early, you miss out on additional matching dollars for the rest of the year.

THE IMPACT
Because Tim’s plan doesn’t offer a true-up, he’ll miss out on 9 pay periods’ worth of 4% employer matching contributions—about $2,500 this year alone.
If this happens every year for the next 23 years until retirement, factoring in investment growth, Tim could leave almost $165,000 on the table.

THE LESSON
Only about half of 401(k) plans in the U.S. have true-up provisions. If you’re front-loading your contributions—or contributing heavily—make sure you understand how your plan works.

ASK:
Does your plan have a true-up provision?
Are you maximizing both your contributions and your employer match?
It’s not just about how much you contribute—it’s about how you contribute. Don’t leave free money on the table.