The standard deadline for 401(k) plan contribution is December 31st, but it is never too early to start thinking about end of year 401(k) plan deadlines. While it is always good to start early, there are a few different plans that have deadlines that are significantly earlier than the December 31st traditional 401(k) deadline.
Safe Harbor Plans Deadline
Two of the most popular types of 401(k) do not have the same December 1st deadline. The Safe Harbor Matching plan, a plan in which employers must match 100% of the first 3% of salary deferrals and 50% of deferrals from 3-5%, must be up and running by October 1st. However, since there are several week delays between setting up the plan and it being active the deadline for this type of 401(k) is September 15th.
The Safe Harbor Non-Elective plan, in which an employer must match 3% of compensation regardless of employee contribution, must be up and running by November 30th. Just like the Matching plan, the process takes a few weeks so the plan must be set up by a deadline of November 15th.
401K Takeover Plans Deadline
The second type of plan with an earlier than normal deadline is the 401K Takeover plan, when you merge your plan with a new employer, which has a deadline of September 30th to be completed.
401K Takeover Plans that are going to be converted to Matching Safe Harbor plans must be completed by December 1st to successfully make the conversion on time and begin earning the 3% contribution from your employer.
Making Sure You Are On Time
The more years a 401K plan is active and the more is saved into it, the earlier and more comfortable your retirement will be, so it is critical to start your 401K on time or early so you do not miss potential savings. Since a 401K’s funds are not taxed until they are withdrawn, missing out on starting early will result in paying more taxes than you would otherwise have to.
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