Managing a retirement plan comes with important responsibilities throughout the year. One of the biggest challenges plan sponsors face is keeping track of the various compliance deadlines tied to plan testing and required filings. Missing a deadline can lead to additional administrative work, potential penalties, or required corrective actions.
Understanding the annual compliance timeline can help plan sponsors stay organized and ensure their retirement plans continue operating smoothly. Below is a general overview of key milestones many plan sponsors encounter throughout the year.
Early in the Year: Data Collection and Testing Preparation
At the beginning of the year, plan administrators begin gathering payroll and participant data from the previous plan year. Accurate compensation information, employee eligibility records, and contribution details are essential for completing required compliance testing.
This is also an important time for plan sponsors to review employee census data and confirm that eligibility, compensation, and contribution records are accurate. Clean and complete data early in the process helps streamline testing and reduces the likelihood of delays or corrections later in the year.
Spring: Compliance Testing
Once year-end data has been finalized, plan administrators typically perform required nondiscrimination testing. For many 401(k) plans, this includes the Actual Deferral Percentage (ADP) and Actual Contribution Percentage (ACP) tests. These tests are designed to ensure that retirement plans do not disproportionately benefit highly compensated employees compared to other eligible employees.
If a plan does not pass these tests, corrective actions may be required. In some cases, refunds must be issued to highly compensated employees. For calendar-year plans, corrective distributions are often completed by March 15 to avoid additional excise taxes.
Additional tests such as top-heavy testing or coverage testing, may also be conducted depending on the plan’s design.
Mid-Year: Form 5500 Preparation and Filing
Another key compliance requirement for retirement plans is the annual Form 5500 filing. This report provides information about the plan’s financial condition, operations, and investments.
For calendar-year plans, the standard filing deadline for Form 5500 is July 31. Many plan sponsors choose to file an extension, which moves the deadline to October 15. Even when an extension is requested, it’s important to begin preparation early to ensure all necessary information is gathered and reviewed.
Year-Round: Monitoring Plan Operations
While many compliance tasks take place after the plan year ends, ongoing monitoring throughout the year is just as important. Plan sponsors should regularly review employee eligibility, enrollment activity, and contribution deposits to ensure the plan is operating according to its governing documents and regulatory requirements.
Periodic check-ins with plan advisors and administrators can help identify potential issues early and prevent larger compliance problems later.
Simple Ways to Stay Ahead of Deadlines
Keeping retirement plan compliance on track does not have to be overwhelming. A few proactive steps can make a significant difference throughout the year. Plan sponsors can help stay ahead by:
- Keeping payroll and employee census data accurate and up to date
- Marking key compliance deadlines on an annual calendar
- Reviewing plan participation and eligibility regularly
- Working with plan advisors early to begin testing preparation
Don’t Let Compliance Deadlines Sneak Up on You
Retirement plan compliance involves multiple deadlines and moving parts. Establishing a clear timeline and working with experienced advisors can help plan sponsors stay on track and reduce administrative stress. If you have questions about your plan’s testing deadlines or upcoming filing requirements, the Cornerstone Trust team is here to help. Contact us to review your plan calendar and ensure everything is on track for the year ahead.