The 401(k) True-Up: How Front-Loading Costs You Match

You did the sensible thing. You set your contribution rate high, hit the 2026 limit of $24,500 in early June, and gave the money an extra six months in the market. Your employer's match stopped in June too, and nobody told you, and it cost $2,925.

This catches financially engaged people almost exclusively, because you have to be trying to optimise to walk into it. The mechanism is one sentence long and it is buried in a document nobody reads.

How per-pay-period matching actually works

Your plan almost certainly matches on each paycheck, in isolation.

Take a plan matching 50% of the first 6% of pay, a salary of $180,000, and 24 pay periods a year. Each period you are paid $7,500. Six percent of that is $450, and the employer matches half, so $225 per pay period. Do that 24 times and the match is $5,400.

Now read the rule the other way round. The match is calculated from what you contributed in that period. Contribute nothing in a period and there is nothing to apply 50% to, so the match for that period is zero. It does not accumulate, it does not carry over, and it is not reconciled later unless the plan says it is.

Which means the annual limit, a number about your contributions, quietly becomes a cap on your match as well. That is the whole trap, and it is why the employer match is worth less than its formula suggests for anyone who finishes early.

The arithmetic of front-loading without a true-up

Same salary, same plan, same total contributed. Only the rate differs.

Identical contributions, identical limit, identical plan. $2,925 of difference produced by a contribution rate.

And it repeats. Someone who sets a high rate once and leaves it there forfeits $2,925 a year, every year. Ten years of that, invested at 7%, is $40,413.

The small consolation in the table: period 11 is the period in which the limit is reached, and the contribution in that period is still above the 6% cap, so it collects a full $225. Stopping mid-period does not cost you that period's match. It costs you every period after it.

What a true-up provision does

A true-up recalculates the match after year end on an annual basis: it looks at your total contributions for the year, works out what the match would have been if calculated once rather than 24 times, and pays the difference.

So in the front-loaded column above, a plan with a true-up would deposit the missing $2,925 some time in the first quarter of the following year. The forfeit disappears entirely.

Three things about them worth knowing:

• They are optional. Nothing requires a plan to have one, and plenty do not.
• The money arrives late. Typically in the first quarter after year end, so it misses several months of growth even when you receive all of it.
• You may have to still be employed. Some plans require employment on the date the true-up is paid, which matters if you are leaving in January.

How to find out whether your plan has one

Two routes, and the second takes under a minute.

Search the summary plan description for "true-up" or "true up". Your employer is required to provide this document, and it is usually in the same portal as your statements.

Or email HR or the plan administrator. Send exactly this:

Both are yes-or-no facts that whoever administers the plan knows immediately. You are not asking for advice or a favour, and there is no reason for the question to be awkward.

While you are there, ask about the vesting schedule too, since it is the other plan feature with five figures attached: vesting schedules and the cost of leaving early.

What to do in each case

No true-up, per-period matching. Set your contribution rate so the annual limit is reached in the final pay period of the year. On $180,000 with a $24,500 limit, that is 13.6%. Work out yours by dividing the limit by your annual salary, then check in December that you are on track.

True-up, and you want the extra months invested. Front-load if your cash flow can take it. Over a career the extra time in the market is worth having, and the match is protected.

True-up, and the cash flow is tight. Spread it. A 30% contribution rate for half a year is a real squeeze, and the benefit of front-loading is modest against the risk of running the household on a card in March.

You are leaving mid-year. Front-loading can be right even without a true-up, because you will not be there for the later pay periods anyway. Work out how many periods you will actually be employed for, and set the rate against that.

When this does not apply

If your plan matches annually rather than per pay period. Some do, and it is the cleanest arrangement: the match is computed once on your annual total and the whole trap disappears. This is the first thing your email establishes.

If there is no match at all. Then contribution timing is only about time in the market, and front-loading is straightforwardly better if you can afford it.

If you are nowhere near the limit. Contributing a steady 8% all year never triggers this, because you never stop contributing. The trap needs a stop.

If you are 50 or over. The 2026 catch-up adds $8,000 on top of the $24,500, or $11,250 if you turn 60, 61, 62 or 63 during the year. The limit is further away, so a given rate reaches it later, and the rate that lands you in the final pay period is higher.

If your pay is variable. Commission or bonus pay makes the "finish in the last period" calculation a moving target. Review it in September and adjust the rate for the remaining periods rather than setting it once in January.

Next steps

1. Send the two-question email today. It takes a minute and the answer is worth up to several thousand dollars a year.
2. If there is no true-up, divide your 2026 limit by your annual salary to get the rate that finishes in the last pay period.
3. Set that rate, and diarise a check in early December to confirm you are on track.
4. If you have already front-loaded this year, accept that year and fix the rate for next. There is no recovery route.
5. Ask about vesting in the same email, since it is the other plan feature worth five figures.
6. Then check what the contributions actually buy, because an optimised rate into an expensive fund is half a job: what 0.85% actually costs you.