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In some firms, the true-up employer match for year X is received the next year (i.e., year X + 1).

Does a 401(k) year-end true-up employer match received in year X+1 for year X count toward the 401(k) max contributions for year X or year X + 1 ?

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Franck, The Vanguard rep is mostly correct, but we have to look at a few sections in the regulations to come up with a definitive answer.

To begin with, the limit you are referring to is the Annual Additions limit described in Internal Revenue Code (IRC - aka 26 United States Code) Section 415(c) and Treasury Regulation 1.415(c) (26 USC 1.415(c)). In a nutshell, it describes the limit and timing requirements for a contribution to be considered an "Annual Addition".

The actual timing requirement is found in Treasury Regulation 1.415(c)-1(b)(6)(i)(B) which states:

(B)Date of employer contributions. For purposes of this paragraph (b), employer contributions are not treated as credited to a participant's account for a particular limitation year unless the contributions are actually made to the plan no later than 30 days after the end of the period described in section 404(a)(6) applicable to the taxable year with or within which the particular limitation year ends. If, however, contributions are made by an employer exempt from Federal income tax (including a governmental employer), the contributions must be made to the plan no later than the 15th day of the tenth calendar month following the end of the calendar year or fiscal year (as applicable, depending on the basis on which the employer keeps its books) with or within which the particular limitation year ends. If contributions are made to a plan after the end of the period during which contributions can be made and treated as credited to a participant's account for a particular limitation year, allocations attributable to those contributions are treated as credited to the participant's account for the limitation year during which those contributions are made.

Limitation year is normally the same as the plan year (see 26 CFR 1.415(j)-1). The "30 days after the end of the period described in section 404(a)(6)" is the key part. 404(a)(6) says this:

(6) Time when contributions deemed made For purposes of paragraphs (1), (2), and (3), a taxpayer shall be deemed to have made a payment on the last day of the preceding taxable year if the payment is on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year (including extensions thereof).

The return being referenced is the Form 5500 series which is basically the tax return for retirement plans. The due date for it is normally the last day of the 7th month after the close of the year. An extension gives the employer an additional 2 1/2 months to submit the return - and deposit any employer contributions to be credited for the prior year.

Be aware that the timing requirements for the employer to be able to deduct some of those contributions from their corporate taxes is a bit different.

On your comment regarding a matching true-up contribution: same rules apply. Your employer generally won't know your exact full year compensation until after the year has completed. Then they can calculate the match based on that actual compensation and adjust accordingly.

tl;dr - If your retirement plan runs from January 1, 2017 to December 31, 2017, your employer has until October 15, 2018 (if they file the extension for the Form 5500) to make an employer contribution to be considered a 2017 plan year contribution.

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Contributions count in the year they are made, so if your employer is (intentionally or unintentionally) late and contributes in year X+1, it counts for that year's limits.

However, note that there is a separate (and much higher) limit for employer contributions (For 2018, the overall limit is $55,000, or $61,000 with catch-up contributions), so this is rarely an issue. Your contribution limit (18 500 for 2018, 24 500 with catch-up contributios) is not affected by that - unless the employer match is more than the difference of 36 500.

  • Thank you for the information. Yes, the 401(k) max contributions I had in mind was the employee+ employer contributions, which is 55kUSD in 2018. Note that assuming that the employer doesn't contribute, the employee max 401(k) contribution is also 55kUSD in 2018, with the exception of catch-up contributions as you've noted. – Franck Dernoncourt Jul 7 '18 at 3:03
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    I hate that is treated like that, sometimes they dawdle around and the paycheck from Dec-29 makes it only in Jan in my 401k, and uses the new limit :-/ – Aganju Jul 7 '18 at 3:04
  • Welcome to the club… In my case, the last paycheck arrives at least two weeks before December 31, but still the year-end true-up employer match arrives the year after. Not clever, unless there is a strong reason for it, which I don't see. Is a year-end true-up employer match supposed to be received the next year? if you have any idea on that side. – Franck Dernoncourt Jul 7 '18 at 3:07
  • FYI according to a Vanguard's customer representative I contacted, the 401(k) year-end true-up employer match received in year X+1 for year X count toward the 401(k) max contributions for year X, and not for year X + 1 as you answer indicates. Do you have any reference to support your claim? (the Vanguard's customer representative I contacted didn't provide any reference either) – Franck Dernoncourt Jul 11 '18 at 19:36
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According to a Vanguard's customer representative I contacted, the 401(k) year-end true-up employer match received in year X+1 for year X count toward the 401(k) max contributions for year X.

Quoting her email:

Since the true-up is based on contributions made in the previous calendar year, it is made to eligible participants the following year. In addition, the true-up contribution received will count toward the previous year. For example, a true-up contribution received in 2018 based on contributions in the 2017 calendar year will count toward 2017.

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