As a follow-up to our article on August 19, 2022, we continue to look at best practices for establishing a 401(k) Plan. It is a great benefit for employees but employers must be aware of their fiduciary responsibilities. To ensure your Plan is compliant and running well, consider the following end of year items.
- Annual 401(k) limits
- Plan management should be aware of contribution and wage limits for the upcoming year. For 2023, the IRS 401(k) contribution limit is $22,500. Participants that are age 50 and over may contribute an additional $7,500 in 2023 for a total contribution of $30,000. The amount of compensation that can be considered when calculating employer and employee contributions is increased from $305,000 in 2022 to $330,000 for 2023.
- Enrollment meetings
- Plan management should be sure that all eligible employees have been identified and given the opportunity to participate in the Plan. The end of the plan year can be a good opportunity to hold enrollment meetings with employees who are interested in enrolling, making a change, or who would like to stay informed. If eligible employees can enroll effective January 1, the end of the plan year is a good change to make sure they do not miss enrollment.
- Timeliness of deferrals
- Plan management should review the timeliness of employee deferrals into the Plan. The Department of Labor rules require that deferrals be deposited as soon as feasible by the contributing employer to the Plan. The end of the year is a good chance to review deferrals and, if necessary, make corrective contributions to participant accounts.
For additional questions related to this or any topic, please contact your TBC Advisor.