The information posted on PayrollTalk is for informational purposes only and is not intended to substitute for obtaining accounting, payroll, tax, or financial advice from a professional accountant.

401k Annual Match

Hi everyone,

We are using a 3rd party to process our payroll and they are unable to provide a match if the employee does not have a contribution in that pay period.

Is anyone else have a plan where the match is based on an annual contribution?


  • Are you talking about a 401(k) plan? And if so, have you read YOUR company's 401(k) plan? And if so, what does it say?

  • The plan states that the 401K match is based off of an annual amount and not a per contribution amount. So a true up happens in February of the next year causing concerns when the match is over/under.

    the company would prefer for the employee to receive the match each pay period even if there is no contribution up to the limit of $10,800 or $270K eligible earnings is met.

  • Legally you have to do EXACTLY what the plan is. The 3rd party administrator has no authority other then what the plan gives it.

  • You need to clarify if the match is supposed to be annual or per pay period based on the plan document FIRST! Your TPA/attorney should be able to clarify. If not, get a new TPA/attorney!

    If the plan document is different than what the "company prefers" then you need to amend the plan document! You CANNOT just decide to "prefer" it be done differently and then do it however you prefer.

    Is this match a safe harbor match? If not, why would you be giving it to employees who don't have a deferral that pay period? If so, It's interesting that the payroll provider would have a problem with a % calculation off of a specific compensation definition (based on the plan terms). And NO you should not be letting the payroll provider decide how to fulfill the terms of the 401k plan. If you give it per payroll period, you might be overgiving and distribute match to an employee that is terminated at the end of the year that should not have gotten it (again based on your plan document)

    Then you need to be having a meeting of minds between you, your TPA and your payroll provider. First and foremost the employer needs to be following the plan document like David said - they are the fiduciary and most responsible for following the plan terms.

    So your choice is to change the plan, change the TPA or change the payroll provider or some/all of the above. But get it right rather than just a "prefer"ence.

    Sorry -- standing on my soapbox screaming at this one!!!! (did 401k administration for years for one of the top HR consulting firms and really wish those that had 401k plans were more well versed in the laws that cover them!)

  • In the middle 1980s the company I was working for put in a 401(k) plan. We paid someone to write it. I am not sure if anyone in the company ever actually read it. Several years later IRS audited, and we got hammered ($250K). All little stuff, nothing major. I was payroll, and HR got blamed. Every single person in HR was fired (could have me). The next job I went to one of the very first things I did was to request current copies of all benefit plans and READ THEM. I then had a formal meeting with HR and went over any and all areas not perfectly clear. I have had problems with HR before, but this time the HR benefits manager got the point immediately. We had a very expensive national benefits consultant in the next week, and every plan which was not both clear and in complete compliance was updated. The payroll system was updated where it was not clear on that side.

    Never, never, NEVER guess. If it is not clear, FIX IT.

    No one will want to hear this but maybe 9 years they changed the Section 125, NQDCP and stock rules big time. Serious penalties and serious rules that never existed before. There are still some benefit plans like maybe parking with small penalties but those are getting pretty rare. IRS is extremely serious about benefits these days, and IRS audits where the penalties are.

Sign In or Register to comment.