Year-End 401(k) Steps for Employers

Before the plan year closes, employers should take time to review the administration, compliance, and overall effectiveness of their company’s 401(k) plan. Although recordkeepers, third-party administrators, and other service providers may manage many day-to-day functions, the employer retains important responsibilities as the plan sponsor.

A detailed year-end review can uncover contribution discrepancies, support compliance efforts, and help the organization prepare for the next plan year. It is also an appropriate time to assess whether the plan continues to serve the company and its employees effectively. Jack V. Butterfield Investment Company helps businesses in Jackson, Michigan, approach these retirement planning responsibilities with greater organization and clarity.

Review Employee 401(k) Contributions

Begin by checking that employee salary deferrals were calculated correctly under the plan’s definition of eligible compensation. Employers should also verify that withheld contributions were deposited into the plan as soon as administratively practical, rather than relying solely on the outside 15-business-day deadline.

Contribution accuracy and deposit timing can become significant issues during an audit. A coordinated review can be helpful: payroll or human resources personnel may confirm deductions and deposit activity, while a controller or plan advisor can review employer-funded amounts separately. Comparing each part of the process before year-end may reveal errors while there is still time to address them.

Verify Matching and Profit-Sharing Contributions

Employer funding deserves its own review. Plan sponsors should confirm that matching contributions and any profit-sharing allocations were calculated correctly and funded in accordance with the written terms of the plan.

This review becomes especially important when the plan design changed during the year. Matching formulas should be applied consistently throughout each payroll cycle, and any midyear revisions should be reflected in the contributions ultimately calculated and deposited. Reviewing this information now helps confirm that actual operations match the plan design the employer intended to offer.

Review 401(k) Plan Compliance

The end of the plan year is a useful point for checking compliance obligations. Depending on the specific design of the plan, that may involve preparing for or reviewing nondiscrimination testing, including ADP/ACP testing and top-heavy testing. These requirements help determine whether the 401(k) plan continues to meet applicable standards.

Employers should also compare the plan document with the way the plan was administered during the year. When written provisions and everyday operations do not align, the result may be a compliance concern that could have been avoided with regular oversight.

It is also wise to monitor any plan amendments associated with SECURE 2.0 provisions. While many operational requirements are already in effect, most related document amendments are not required until the end of 2026. Tracking completed items and outstanding work can help business owners keep their retirement plan administration on course.

Confirm Participant Notices Have Been Distributed

Required participant communications should be part of every year-end 401(k) checklist. Depending on the plan, employers may need to provide safe harbor notices, Qualified Default Investment Alternative notices, and notices related to automatic enrollment or automatic contribution increases.

Many required notices must be delivered before the year ends, and some have a December 1 deadline. Employers should verify that all applicable notices have been sent or are scheduled for timely distribution. Each notice should also be reviewed for accurate and current plan information before it reaches participants.

Check Required Minimum Distributions

Plans with participants who are age 73 or older should review required minimum distributions, commonly called RMDs. Confirm that any applicable distributions have been calculated accurately and are scheduled to be paid before the end of the year.

RMD responsibilities can be missed when employers are balancing payroll, participant notices, testing, and other administrative tasks. Rather than presuming that a provider has completed this step, plan sponsors should specifically verify the status of each required distribution during the year-end review.

Assess the Plan’s Overall Performance

A thorough retirement plan review should extend beyond administrative compliance. It also provides an opportunity to evaluate whether the plan remains effective for the organization and the employees who rely on it for long-term wealth and retirement planning.

Consider whether participation levels meet the company’s goals. Review whether plan fees remain reasonable for the services provided and whether the current provider is still well suited to the organization’s needs. These questions can be particularly important as a business grows, changes ownership, or begins broader succession planning discussions.

An annual fiduciary review may also address committee governance, adherence to the investment policy, plan expenses, service quality, and vendor performance. Employers may wish to consider how their investment services, including the available mutual funds, ETFs, stocks and bonds, or annuity options, continue to support participants’ investment planning needs. Consistent oversight helps identify potential concerns before they develop into more significant problems and supports a diligent approach to fiduciary responsibilities.

Plan Ahead for Reporting and Testing

Year-end planning should include preparation for the next plan year. Employers can start by reviewing updated contribution and compensation limits that will apply in the coming year. Because these amounts can affect payroll configuration and participant communications, early preparation can make the transition smoother.

Plan sponsors should also identify the information needed for Form 5500 reporting and upcoming testing requirements. Gathering records and clarifying responsibilities before the new plan year begins can reduce last-minute pressure when filing and testing deadlines arrive.

Start the Next Plan Year With Confidence

Completing a year-end 401(k) review does more than reduce administrative burdens. It can help safeguard employee retirement savings, support compliance, and give employers a more organized foundation for the year ahead.

For businesses evaluating 401(k) plans and other business owner retirement plans, Jack V. Butterfield Investment Company provides professional guidance from our Jackson, Michigan, office. Our team can help employers review year-end responsibilities, coordinate investment planning considerations, and prepare for the steps that require attention before December 31.