Before the plan year closes, employers should take time to evaluate the administration, compliance, and overall effectiveness of their 401(k) plan. Even when recordkeepers and third-party administrators manage many day-to-day functions, the employer retains important responsibilities as the plan sponsor.
A structured review can uncover contribution discrepancies, help address required notices and distributions, and make next year’s reporting process more manageable. It also gives employers a chance to consider whether the plan remains a meaningful part of their employees’ retirement planning and long-term financial goals.
Verify Employee Deferrals and Deposits
Begin by reviewing employee elective deferrals. Confirm that payroll deductions were determined using the plan’s definition of eligible compensation and that the proper amounts were withheld from each participant’s pay.
Employers should also verify that employee contributions were deposited into the plan as soon as administratively feasible. The 15-business-day rule is not a general target date for deposits, so relying on that outside deadline instead of the plan’s normal deposit timing may lead to concerns.
Because errors involving deferrals and deposit timing can surface during an audit, it is helpful to involve the right internal parties in the review. Payroll or human resources personnel can validate deductions and deposit activity, while a controller or plan advisor may separately assess employer-funded amounts. Reviewing the process from more than one perspective can make inconsistencies easier to identify.
Review Matching and Profit-Sharing Contributions
Employer contributions require their own year-end review. Plan sponsors should confirm that matching amounts 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 a plan’s design changed during the year. For example, a revised match formula must be applied correctly for the applicable payroll periods, and all changes should be reflected in the contributions that were ultimately deposited.
Checking these details before year-end can help ensure that the plan operated as intended. It may also support a more organized financial planning process for the business as it prepares for the next plan year.
Assess Compliance and Plan Document Alignment
Year-end provides a practical opportunity to examine key 401(k) compliance responsibilities. Depending on the plan’s structure, the employer may need to prepare for or review nondiscrimination testing, including ADP/ACP testing and top-heavy testing.
These tests help determine whether the plan continues to meet applicable standards. Addressing preparation needs early may provide more time to resolve issues that could otherwise affect highly compensated employees or require corrective action.
Plan sponsors should also compare actual plan operations with the current plan document. When daily administration does not match the written terms of the plan, the difference can create an unnecessary compliance concern.
It is also wise to monitor outstanding amendments related to SECURE 2.0. Although operational compliance with many provisions is already expected, most related document amendments are not required until the end of 2026. Maintaining a clear record of completed items and remaining tasks can help employers stay prepared.
Confirm Participant Notices Have Been Delivered
Required participant communications are another essential part of the year-end checklist. Depending on the design of the plan, notices may include safe harbor notices, Qualified Default Investment Alternative notices, and communications addressing automatic enrollment or automatic escalation features.
Many notices must be delivered before the end of the year, and some have a December 1 deadline. Employers should confirm that all applicable communications have been distributed or are on schedule for timely delivery.
Accuracy matters as much as timing. Each notice should reflect current plan provisions and provide participants with clear information about their available options. Reliable communication helps employees make informed decisions about retirement planning and financial security.
Check Required Minimum Distributions
Employers with plan participants age 73 or older should verify the status of required minimum distributions, or RMDs. Applicable amounts should be calculated correctly and distributed before year-end.
RMD administration can be missed when payroll, compliance testing, notices, and other obligations demand attention. Rather than presuming that distributions have been completed, plan sponsors should confirm their status directly as part of the review process.
Evaluate Whether the Plan Is Meeting Its Goals
A year-end 401(k) review should extend beyond administrative compliance. It is also an opportunity to evaluate whether the plan is serving the organization and its employees effectively.
Employers may want to examine participation levels, plan fees, provider services, and whether the current arrangement still meets the company’s needs. These questions can be particularly important as a business grows, changes its workforce, or reevaluates its broader approach to employee benefits and wealth management.
An annual fiduciary review may also include committee governance, investment policy adherence, investment management services, vendor performance, and the reasonableness of fees. Routine oversight can help plan sponsors recognize developing concerns early and demonstrate a careful approach to their fiduciary duties.
For employers in Grand Rapids and throughout West Michigan, Hungerford Financial can help place these discussions within a broader view of financial wellbeing. A well-managed retirement plan may complement employees’ personal financial planning, tax planning, insurance strategy, estate planning, and college planning priorities.
Organize for Next Year’s Reporting and Testing
Year-end preparation should also include planning for the upcoming year. Employers should become familiar with updated contribution limits and compensation thresholds, since these changes may affect payroll configuration, plan administration, and participant communications.
It is also useful to identify the information that will be needed for Form 5500 preparation and future compliance testing. Gathering records in advance and understanding the next set of deadlines can reduce pressure once the new plan year begins.
Hungerford Financial takes a holistic approach to retirement planning and long-term financial goals. As an independent financial advisor in Grand Rapids, Hungerford Financial can help employers consider how their workplace retirement plan fits within the larger financial security of their organization and workforce.
Build a Stronger Start to the New Plan Year
Completing a thorough year-end 401(k) review is not simply an administrative exercise. It can help safeguard employee retirement savings, support compliance efforts, and create a more orderly transition into the next plan year.
By reviewing contributions, notices, distributions, plan operations, and upcoming reporting needs, may help employers begin the next year with greater clarity. We are available to help businesses review their 401(k) plan responsibilities and identify the items that may require attention before December 31.
This material is for general informational and educational purposes only and should not be construed as individualized investment, tax, legal, or retirement plan advice. The information presented is not intended to address the specific circumstances of any employer, plan sponsor, participant, or retirement plan. Employers should consult with their plan advisor, third-party administrator, recordkeeper, ERISA counsel, tax advisor, or other qualified professionals regarding their specific plan responsibilities. Retirement plan rules are complex and subject to change. Examples of deadlines, limits, and requirements are provided for general context and may not apply to every plan. Hungerford Financial does not provide legal or tax advice. Investment advisory services are offered through Hungerford Financial. This article was prepared with the assistance of artificial intelligence and reviewed by our team for accuracy, clarity, and relevance before publication.