Offering a 401k plan is a solid move to attract and retain quality talent. But what comes next? Compliance. Here's a guide to ensure your 401k plan ticks all the legal boxes to provide small business 401k plan compliance.
Annual Testing Requirements
Each year, your 401k plan needs to pass specific IRS tests, like the Actual Deferral Percentage (ADP) and Actual Contribution Percentage (ACP) tests. These assess whether contributions made to the plan favor higher-income employees disproportionately. Conduct annual tests to maintain your plan's tax-qualified status.
Nondiscrimination Rules
Under IRS guidelines, 401k plans should benefit all employees, not just the high earners or top brass. Ensure your plan doesn't discriminate by conducting non-discriminatory tests or adopting a Safe Harbor 401k plan, which is exempt from some of these tests.
Consequences of Non-Compliance
You must meet compliance to avoid penalties, additional taxes, or even the disqualification of your small business 401k plan. It's crucial to keep the program compliant to prevent these severe repercussions.
Partner with Options 401k
Navigating compliance is challenging but less daunting with a reliable partner. Options 401k specializes in assisting small businesses to maintain compliance with minimal hassle. They handle annual testing, offer consulting services for rule navigation, and assist in the event of an IRS audit.
Maintaining 401k compliance is non-negotiable and is something you need to keep on top of as a small business owner. Partner with Options 401k to implement a smooth, worry-free retirement plan for your employees. Get started today.