Managing retirement plan contributions—whether for a 401(k) or a SIMPLE IRA—requires accuracy and timeliness. Even small mistakes, such as late deposits or incorrect allocations, can lead to compliance issues with the IRS and Department of Labor (DOL). Below are best practices to help employers stay compliant and avoid costly errors.
- Know the Timing Rules
- For All Plans (DOL Requirement): Employee contributions must be deposited as soon as administratively possible, but no later than 7 business days after payroll for small plans (under 100 participants).
- Match Payroll Reports Exactly
When making deposits, always use the amounts shown on your payroll reports. This includes:
- Employee Deferrals (Pretax or Roth)
- Catch-Up Contributions
- Employer Safe Harbor Match
- Discretionary Contributions
- Profit Sharing Contributions
- Correct Check Date
Why? Matching payroll reports ensures:
- Correct categorization of funds.
- No need for reclassification later.
- Accurate and more cost-effective reporting for compliance
- Avoid Combining Payments
Do not combine multiple payroll periods into one deposit. Each payroll’s contribution should be deposited separately and promptly.
- Communicate with Employees
Employees should understand:
- Deferrals are capped at annual IRS limits.
- Catch-up contributions apply only after regular limits are met. **This is a new rule starting in 2026.
- Allocation may vary throughout the year.
- Each retirement plan is different; your plan document is your source for plan questions.
Summary
Whether you sponsor a 401(k) or SIMPLE IRA plan, compliance requires attention to detail. Follow payroll reports, deposit promptly, and follow your plan document. These steps will help you stay compliant with IRS, ERISA, and DOL rules.