As the current year comes to an end, there are several tasks plan sponsors must complete to properly close out 401(k) plan administration before the new plan year begins.
This guide shares what to expect and how to prepare – so you can begin the new plan year on the right track. With Guideline, plan years run on a calendar-year basis, meaning January 1 will be the start of the new plan year.
Verify or update company information
Ensure Guideline has accurate information about your owners and officers by completing the company information task on your dashboard.
Let us know if you have or are planning to switch payroll providers. You can learn more about how to report a payroll provider change here.
Monitor your compliance dashboard
Review your projected compliance results via the Compliance Status section of your administrator dashboard. You can see additional details by clicking on the “View” button or by visiting your Compliance page.
Note that Safe Harbor 401(k) plans will automatically satisfy most non-discrimination testing requirements.
If you are part of a legally related group, you will not have access to compliance projections, due to the complex nature of your results.
Elect final contributions
Confirm that owner’s draw elections for those with self-employed income, are elected no later than December 31 (even if a participant would like the contribution to be made in the following year for the current plan year).
Understand end-of-year payroll and annual limits
Bonus payments cannot be excluded from your 401(k) contributions, even if they are paid in a separate payroll. If participants receive a bonus, let them know they can temporarily adjust their deferral rates via their dashboards before the payroll is run, if desired. Any applicable employer nonelective contributions and match will apply to bonus pay as normal.
All payrolls with a pay date on or after January 1 will count toward the next plan year’s contributions, regardless of whether it was attributable to work performed within the previous year. For 401(k) plans, compensation is counted when it is actually paid, not when it was earned.
Any employees who reach annual limits before the end of the year may have contributions capped by either your payroll provider or Guideline to prevent overages.
When the new year begins
Toward the beginning of the new plan year, we’ll send you tasks within your administrator dashboard when it’s time to handle certain actions. Here are several tasks you may need or want to complete: