Your Year-End 401(k) Compliance Roadmap: A Strategic Planning Guide

Authored by Tracey Solomon

As we approach year-end, now is the ideal time for plan sponsors to begin preparing for 401(k) compliance requirements. Successful retirement plan management goes beyond addressing deadlines as they arise—it’s about strategic, year-round planning that ensures your plan stays compliant while serving your employees’ best interests.

At Bartlett, Pringle & Wolf, we’ve guided countless Santa Barbara and Central Coast businesses through the complexities of 401(k) compliance for over seven decades. Here’s your roadmap to year-end success and how to build a sustainable compliance framework.

The Critical Year-End Timeline

Your 401(k) compliance calendar should be anchored around key deadlines, but the real work begins months before your filing date. For calendar year plans, Form 5500 is due July 31 of the following year, with a possible 2 ½-month extension if filed properly. This means your year-end planning should start in earnest by October. If you haven’t already started planning its not too late.

 

 

Start Now: Foundation Setting

Document Review: Ensure your plan document reflects all current amendments and regulatory changes
Participant Count Assessment: Determine if you’ll need an audit for the coming year (plans with 100+ participants with account balances)
Auditor Selection: If an audit is required, begin the selection process early—quality auditors book up quickly
Internal Controls Evaluation: Review and strengthen your deposit procedures, enrollment processes, and recordkeeping systems

January – March: Data Gathering and Preparation

Year-End Reports: Collect trust statements, payroll files, and nondiscrimination test results
Document Organization: Prepare your “audit captain” approach—designate one internal leader to coordinate all moving parts
Preliminary Issue Identification: Run preliminary compliance checks to identify potential issues early

The Four Pillars of 401(k) Compliance Success

1. Accurate Plan Documentation

Your plan document isn’t just paperwork—it’s your compliance blueprint. Laws and regulations evolve constantly, and outdated documentation is one of the fastest ways to run into trouble. Create a systematic review process that includes:

Annual document review with legal counsel
Amendment tracking and implementation
Clear communication of changes to all stakeholders

2. Timely Contribution Processes

Perhaps no area causes more compliance headaches than contribution timing. The stakes are high: small plans have a seven-business-day safe harbor, while large plans must deposit contributions “as soon as administratively feasible”—usually much sooner than the regulatory maximum.

Best Practice Strategy: Build your processes around the tightest reasonable timeline, not the regulatory maximum. If you can deposit funds within three business days, do so consistently. Document your process and stick to it.

3. Compensation Definition Precision

Compensation calculation errors are among the most common audit findings, often leading to costly corrective contributions. The solution requires coordination between your plan document, payroll systems, and ongoing monitoring.

Strategic Approach: Conduct a quarterly “compensation reconciliation” to ensure your payroll system matches your plan’s compensation definition exactly. Include all required elements (bonuses, overtime, commissions) while excluding inappropriate items.

4. Employee Eligibility Management

Missed enrollments can trigger expensive corrective contributions and damage employee relations. Success requires clear communication between HR, payroll, and plan administrators.

Systematic Solution: Create an eligibility tracking system that flags upcoming eligibility dates 30 days in advance, ensuring no eligible employee falls through the cracks.

Building Your Year-Round Compliance Framework

The Audit Captain Approach

Designate one internal leader as your “audit captain”—someone who owns the entire compliance process and coordinates with all stakeholders. This person should:

Maintain the master compliance calendar
Coordinate with payroll, HR, and external service providers
Monitor regulatory changes and their plan implications
Serve as the primary contact for auditors and consultants

Quarterly Checkpoints

Don’t wait until year-end to discover problems. Institute quarterly reviews that include:

Contribution timing analysis
Compensation calculation spot-checks
Employee eligibility verification
Plan document currency review

Technology and Process Integration

Modern compliance requires modern tools. Consider implementing:

Automated contribution processing systems
Integrated payroll and plan administration platforms
Digital document management systems
Real-time compliance monitoring dashboards

When Issues Surface: The Correction Strategy

No plan is perfect, and discovering issues during your compliance review isn’t necessarily cause for panic. The key is addressing problems promptly and systematically.

Both the IRS and DOL offer correction programs designed to help plans fix defects while minimizing penalties. The earlier you identify and address issues, the less costly and disruptive the correction process becomes.

Critical Success Factor: Work with experienced professionals who can guide you through correction programs and help prevent similar issues in the future.

Looking Ahead: Making Compliance Routine

The goal isn’t just surviving this year’s filing deadline—it’s building a sustainable compliance framework that makes future years routine rather than stressful.

Successful plan sponsors treat compliance as an ongoing business process, not an annual crisis. They invest in proper systems, maintain current documentation, and work with experienced advisors who understand both the technical requirements and practical realities of plan management.

Your Next Steps

Start your year-end planning now. Review your current processes, identify potential improvement areas, and build the systems that will serve you well beyond this year’s deadline.

Remember: proactive planning today prevents compliance crises tomorrow. Your employees’ retirement security and your organization’s fiduciary well-being depend on getting this right.

If you need guidance developing your compliance framework or addressing current plan issues, the experienced team at Bartlett, Pringle & Wolf is here to help. We’ve been helping Central Coast businesses navigate complex financial regulations for over 78 years, and we understand that successful compliance is about building sustainable systems, not just meeting deadlines.