When special payrolls for bonuses, commissions or off-cycle pay occur, 401(k) benefits should be applied, just as they would for any regular payroll cycles. To confirm whether the pay you are offering your employees is considered compensation for 401(k) purposes, we recommend consulting with your tax advisor.

If you have determined a special payroll run should include your 401(k) benefit, you may need to take additional action to ensure the proper collection of any off-cycle payroll runs. Here’s what you should know before processing special payroll allocations.

If your company offers an employer contribution, such as a match or nonelective contribution, any special payroll runs will also be subject to employer contributions.​

Employees’ existing contribution rates will be applied for any special payroll runs. If participants do not want to defer wages to their 401(k) accounts in these instances, they must adjust their contribution rate in their participant dashboards. You cannot perform this action on their behalf. After the bonus payroll has been run, participants can choose to re-update their contribution rate in their participant dashboards for future payroll runs.

Participants who would like to adjust their contribution rate for special payroll processing can make changes within their 401(k) participant dashboard by navigating to the Portfolio tab, then clicking the “Change Contribution” button.

The contribution rate change will need to be completed at least 24 hours before your payroll run. If you have a self-service plan, please ensure the contribution rates your employees have elected within their 401(k) participant dashboard reflect the rates submitted to your payroll provider prior to running payroll. You can check participants’ deferral rates in your 401(k) administrator dashboard by running a Deferral Rates Report.

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If you use Gusto or a Gusto Embedded provider for payroll, special payroll runs will automatically be captured in nightly syncs. Therefore, you do not have to report these payrolls within your 401(k) dashboard.

Learn more about running off-cycle payroll or bonuses with Gusto payroll.

If you have a self-service plan, you will report special payroll runs in the Payroll tab of your 401(k) administrator dashboard. When submitting your payroll report, select the button to Add off-cycle payroll.

You can find step-by-step directions for submitting payroll reports for self-service plans here.

It’s important to submit payroll reports as soon as possible, or you may be required to pay lost earnings to employees and excise taxes to the IRS.