Running a 401(k) plan is a great way to invest in your team’s future, but let’s be honest, the rules around contributions and deposit deadlines can feel like a maze. The good news? Once you understand the basics, staying compliant becomes much easier. Let’s break it down in plain language, so you can focus on helping your employees save for retirement without stressing over the fine print.
401(k) Basics | A Quick Refresher
A 401(k) is an employer-sponsored retirement plan that lets employees save a portion of their paycheck before taxes are taken out. Many employers sweeten the deal by adding their own contributions, either matching part of the employee’s contribution or making profit-sharing deposits.
The big win here? Tax benefits for everyone involved. Employees get to save more for the future, and employers enjoy tax advantages for providing the benefit.
Why Employers Offer 401(k) Plans
It’s more than just a benefit, it’s a retention tool. Offering 401(k) shows employees that you’re invested in their long-term success. It’s a perk that can help attract top talent, keep them around, and support their financial well-being.
Your Responsibilities as an Employer
When you sponsor a 401(k), you’re responsible for making sure contributions are handled properly and on time. These rules are in place to protect employees’ hard-earned money and keep the plan running smoothly.
Contribution Deadlines
Employee contributions need to be deposited as quickly as you can make it happen, not “whenever you get to it.” While the official rule says no later than the 15th business day of the following month, the Department of Labor expects deposits to be made much sooner, often within a few business days after payroll. In short, faster is better.
Employer Contributions
If you match employee contributions or offer profit-sharing, the exact rules will depend on your plan documents. Commonly, employers match a percentage of what employees put in (for example, 50% of contributions up to 6% of salary). Profit-sharing contributions are optional, but if you offer them, the rules should be spelled out clearly and communicated to employees.
Deposit Limits
The IRS sets yearly limits on how much can go into a 401(k). For 2025:
- Employee limit: $23,500 (for individuals under age 50)
- Catch-up contribution limit: $7,500 (for individuals age 50 and over)
- Special catch-up: $11,250 (ages 60-63)
It’s your job to make sure no one’s account goes over these limits, including when you add your contributions.
Staying Compliant — The Paperwork Side
A few forms and disclosures help keep everything above board:
- Form 5500: Filed each year to report the plan’s financials and operations.
- Employee Disclosures: Summary plan descriptions, annual benefit statements, and updates on any changes.
- Nondiscrimination Testing: Annual testing to ensure the plan isn’t giving bigger benefits to highly compensated employees over others.
Common Hiccups (and How to Avoid Them)
- Late deposits: Set up an automated process right after payroll to move contributions promptly.
- Exceeding limits: Review contribution reports regularly, or work with a third-party administrator to catch issues early.
- Rule changes: Stay informed by checking industry updates or working with a benefits advisor.
The Bottom Line
Offering a 401(k) is one of the best ways to support your employees’ financial future. But it does come with rules and those rules are there to protect both you and your team. When you understand the deadlines, limits, and reporting requirements, you can run your plan with confidence and keep it compliant.
As a CPA firm that specializes in employee benefit plan audits, we’ve seen the difference it makes when employers stay proactive. A little attention now can prevent big headaches later and keep your 401(k) benefit working exactly the way it should.
Contact Jake Kriegler, CPA and Partner at Boyum Barenscheer to learn more about our employee benefit plan audit services.