Lump Sum 401k Contribution

I forget the term but make sure they "true up" or something like that. It entails getting your entire match for the year vs. that one time pay period contribution of your match. Someone in the know correct this abomination I just posted.

No he is referring to a true-up contribution not catch-up contributions. The issue is because your company will generally only match when you are contributing. If you do a large lump sum then you are only contributing for a short period (maybe only 1 contribution but definitely not the whole year). Since you are not contributing on your regular paychecks they are not putting in your match.

The true-up is when the company looks at the end of the year and compares what the employee contributed to see if they received the full match they were supposed to get. In this scenario the company will see that their match was much lower than the appropriate % based on how much the employee contributed and thus will do a 1 time true-up contribution to make it right. This true-up is not required and not every company does it. There is a risk of losing out on some match if you max out your contribution prior to the end of the year.

Example to illustrate:
-Paid monthly at $20k a month.
-Company match 1 for 1 up to 10% of salary
-Employee contributes all $20k in January to 401k (not feasible due to FICA taxes probably and insurance but lets just assume)
-In January Company matches 10% or $2k
-Feb through Dec you don't contribute (essentially you have hit the max so can't contribute, max is technical $20.5k if <50 years old)

If your company does not do a true-up contribution then you only get $2k in match which is only 1% not the 10% you should have gotten based on their matching %.

If your company does a true-up contribution then you will get a $18k contribution at the end of the year to ensure you get the 10% because you contributed 10% or more in total.

quote:

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You can get with HR and have them put your whole paycheck in. Beyond that, unless you have a bonus coming. There’s not much you can do unless you own the company.

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I could be wrong, but I think if HR is worth their salt, he could write his company a check that then gets put back into the 401k for wages earned earlier in the year. He certainly can’t call up the 401k provider and do it. And I don’t think he can write a check to the 401k provider (not sure).
But I am almost positive that the only things that matter when it’s reviewed is that you have enough income on your w2 to justify the amount remitted by the company on your behalf to the plan, not whether the money went from them, to you, back to them, to the 401k or not.

It’s also possible HR just makes him withhold bigger portions of his future checks if it works because it’s easier, and if there’s enough income coming to cover the cost of what he wants to contribute, that’s almost certainly an easier option for all involved.


For the future, I have read/heard that some folks who own businesses will contribute their full amount on 1/1 or the first day the bank is open each year without having necessarily earned $20,500 by that date without any real consequences. I would not feel comfortable doing that. I probably should change my compensation up to include a January 401k bonus amount to front-load the account, but I have just deferred my first 2.5 (monthly) paychecks at 100% until the contribution is made in full- So OP, there are some crazy folks out there who contribute 100% of their paycheck to their 401k a few times each year. And there are a few strategies you can look into.


Congratulations on having a wonderful problem to solve. You are winning the game, it seems.