The Importance of Timely 401(k) Contributions

For many employers, managing a retirement plan is one of the most important fiduciary responsibilities they take on. Among the most overlooked compliance risks is the timeliness of 401(k) contributions.

It is not just about following the rules. Delays in funding employee deferrals can impact participant outcomes, increase liability, and trigger costly corrections. Whether you are running a newly implemented plan or managing an established one, understanding the timing requirements and how to meet them is essential.

Why Timely Contributions Matter

Delayed contributions are a fiduciary breach

When employees elect to defer part of their wages into a retirement plan, those dollars must be deposited into the plan promptly. Once withheld from pay, these funds are no longer considered company assets. Failing to deposit them quickly violates ERISA (Employee Retirement Income Security Act) rules and can be seen as a misuse of employee money.

Missed deadlines trigger financial consequences

Late contributions often require plan sponsors to correct the error by calculating and depositing “lost earnings” for each participant. In most cases, the employer must also file a Form 5330 and pay a 15 percent excise tax on the late amounts.

These corrections are time-consuming, complex, and reportable to the IRS and Department of Labor.

What the IRS Requires

The 7-business-day rule for small plans

For plans with fewer than 100 participants, the IRS offers a clear safe harbor: if you deposit deferrals within seven business days of payroll, the contributions are deemed timely.

This rule provides clarity for small business owners and payroll teams, but it also sets a firm limit. Missing this window puts the plan out of compliance.

Large plans must act faster

For plans with 100 or more participants, the IRS applies a more subjective standard: contributions must be deposited “as soon as administratively feasible.”

In practice, this often means within two or three business days. The IRS may examine your payroll capabilities to determine what is feasible based on your internal processes. If you can move money quickly, they expect you to.

“If you are able to pay your employees on Friday, you should be able to also take those funds and put them into the 401(k) that same Friday or the following Monday.”

What Happens If You’re Late?

Late contributions do not go unnoticed. Plan sponsors must take the following steps to resolve the issue:

1. Identify affected payrolls

Every missed deadline must be tracked and documented. This is critical for both internal controls and regulatory reporting.

2. Calculate lost earnings

You must calculate the investment gains employees would have earned if their contributions had been deposited on time. These amounts must then be added to their accounts at the employer’s expense.

3. File and pay excise taxes

In most cases, the employer must file Form 5330 and pay a 15 percent excise tax on the late amounts. This is in addition to the lost earnings that must be funded into the plan.

4. Disclose and report

If the error is significant or systemic, the Department of Labor may require additional disclosures. The issue could also be flagged in the plan’s annual audit or Form 5500 filing.

Common Causes of Late Contributions

Understanding why late contributions happen can help prevent them:

  • Manual payroll processes: Plans that rely on manual file uploads or batch processing are more likely to miss deadlines.
  • Lack of internal controls: Without clear responsibility or oversight, contributions can fall through the cracks.
  • High staff turnover: Changes in HR or payroll roles often result in missed steps or knowledge gaps.
  • Unfamiliarity with rules: Many new plan sponsors are simply unaware of how strict the deadlines are.

These are all preventable with the right systems and support in place.

How to Stay Compliant

Set clear internal procedures

Build a routine around payroll and 401(k) deposits. Assign roles and establish backup procedures so contributions are never delayed due to vacations or staffing changes.

Automate whenever possible

Using automated payroll integration with your 401(k) provider reduces the chance of delay and improves accuracy.

Monitor your timeline

Keep a log of when contributions are withheld and when they are deposited. Regularly audit this timeline to ensure your process is consistent and within the required timeframe.

Partner with a proactive TPA

A good Third-Party Administrator (TPA) will not just manage your compliance after the fact. They will help you establish the right processes up front, monitor for late deposits, and guide you through corrections if needed.

How Mirador Helps

At Mirador, we know that plan sponsors have a lot on their plate. That is why we design retirement plan processes that fit your business, not the other way around.

If a deadline is missed, we help quantify the correction and guide you through the next steps. But more importantly, we work with you proactively to help prevent errors in the first place.

Whether you are managing your first plan or your fiftieth, our team brings deep expertise, steady support, and a commitment to getting it right.

Final Thoughts

Timely 401(k) contributions are not just a compliance checkbox. They are a reflection of your commitment to your employees and your fiduciary responsibility.

Missing a deposit deadline can quickly become a costly and time-consuming problem, but it is one that is entirely avoidable with the right systems and support.

If you are unsure whether your current process meets the timing requirements, let’s talk. Mirador can help you evaluate your current procedures, implement improvements, and stay confidently compliant.

Why Updating Your TPA Is Essential for Your Retirement Plan

Running a business means constant change. You may hire new employees, restructure ownership, or even purchase another company. What many business owners do not realize is that these changes directly affect how your retirement plan is managed. That is why keeping your Third-Party Administrator (TPA) updated is so important.

How Business Changes Affect Your Retirement Plan

Your retirement plan does not exist in a vacuum. Decisions you make throughout the year can shift how the plan operates and how it is tested for compliance. A few examples include:

  • Hiring new employees or partners
  • Buying or selling a business
  • Restructuring ownership shares
  • Experiencing major revenue changes

Each of these updates can influence compliance testing and plan design. Without accurate information, your plan could fall out of compliance, leading to costly corrections or penalties.

The Role of the Annual Compliance Questionnaire

To make the update process simple, we send out an Annual Compliance Questionnaire (ACQ). It is a straightforward way to check in with you once a year and gather any business updates that could affect your plan.

The ACQ covers key details such as:

  • Who owns the business
  • Whether you have purchased or are planning to purchase another company
  • New hires, especially seasonal or large hiring surges
  • Revenue highs or lows

Even if you are not sure whether something matters, sharing it with your TPA ensures your plan is properly aligned.

Controlled Groups and Compliance Testing

Some of the most significant compliance challenges come from changes in business ownership. If you acquire another business, you may inadvertently create what is known as a controlled group or an affiliated service group. These situations require special attention in how retirement plans are tested and administered.

Your TPA uses the information you provide to run accurate non-discrimination testing each year. This testing ensures your plan is fair, compliant, and structured in line with IRS requirements.

Why Timely Updates Build Stronger Plans

At its core, keeping your TPA updated is about partnership. We cannot anticipate the changes in your business unless you share them with us. The more we know, the better we can design and manage your retirement plan so it works for you, not against you.

The Bottom Line

Updating your TPA regularly is one of the simplest ways to protect your retirement plan. Tools like the Annual Compliance Questionnaire make it easy, but the responsibility to provide updates lies with business owners. By keeping your TPA in the loop, you ensure your plan stays compliant, effective, and aligned with your long-term goals.

The “Phantom Hacker” Scam: What You Need to Know

The FBI is warning Americans about a new, highly coordinated scam that has already stolen more than a billion dollars, mostly from seniors. It’s called the Phantom Hacker scam, and it combines three familiar fraud tactics into one devastating scheme.

How the Scam Works

The Phantom Hacker scam unfolds in three phases, often over days or weeks:

1. Tech Support Impostor
It usually starts with a pop-up on your phone or computer claiming your device has been hacked. Victims are urged to call a “tech support” number. Once on the phone, the fake technician asks the victim to download software that gives them remote access. They’ll run a fake scan and warn that your finances may also be compromised, prompting you to open your bank or investment accounts.

2. Bank Impostor
Next, the victim receives a call from someone claiming to be from their bank’s fraud department. This scammer says foreign hackers have accessed the victim’s accounts and that funds must be moved to a “safe” account. Victims are then pressured to transfer money through wire transfers, cryptocurrency, or even cash shipments, which are difficult to trace or recover.

3. Government Impostor
Finally, another fraudster poses as a government official, sometimes from the Federal Reserve or another U.S. agency. They may send emails or letters on fake letterhead to make the scheme appear legitimate, while continuing to insist that funds must be transferred for protection.

Why It’s So Effective

This scam is especially dangerous because it plays on fear and urgency. Victims believe they’re acting to protect their savings, not realizing they’re being guided step-by-step into handing it over. Criminals even use artificial intelligence to make their messages sound more convincing, tailoring scams to people’s interests or online activity.

Red Flags to Watch For

  • Unsolicited contact: No legitimate tech company will reach out with a random pop-up or call.
  • Pressure to act quickly: Scammers insist on immediate action to prevent you from stopping to think.
  • Requests for remote access: Never allow a stranger access to your device.
  • Unusual payment methods: Wire transfers, crypto, and gift cards are favorite tools of scammers.
  • Secrecy: Being told not to discuss what you’re doing with friends or family is a major red flag.

Who Is Being Targeted?

While anyone can fall victim, seniors are most at risk. Many have significant retirement savings and may be less familiar with the latest scams. The FBI warns that in many cases, once money is gone, it’s nearly impossible to recover.

How to Protect Yourself and Loved Ones

  • Talk openly with family, especially older relatives, about scams like this.
  • Be cautious of any unsolicited call, email, or pop-up.
  • Verify directly with your bank or institution using a known phone number before making any transfers.
  • Never move money to “safe” accounts at someone else’s direction.

Bottom line: If you get a pop-up, call, or email saying your money is at risk—stop. Take a breath, hang up, and verify through official channels. Awareness is the best defense against the Phantom Hacker scam.

Key Administrative Deadlines 2025

Deadline Event Description
January
1/31/25 Plan Census Data from sponsor required for annual nondiscrimination testing for calendar year-end due to Atessa Benefits.
Form 1099-R 2024 Form 1099-R to report Plan Distributions due to participants.
March
3/15/25 Corrective Distributions Corrective Distributions: Deadline for ADP/ACP refunds to HCEs are due to avoid 10% excise tax on the employer. Deadline is 2 ½ months after plan year-end.
New Traditional 401k Plan Deadline to adopt a traditional 401k plan for prior year 2024 (S-Corps and Partnerships or LLCs taxed as either one) only-For unextended Co. tax returns
Deductible Contributions Partnership and S-Corp (or LLC taxed as S-Corp) tax return is due, and deductible employer contribution is due unless plan files for a 6 month extension (Form 1065/Form 7004).
April
4/1/25 Required Minimum Distributions (RMDs) Initial Required Minimum Distribution due to terminated participants who attained age 73 in the previous plan year or those past 73 who terminated in the previous plan year.
4/15/25 Excess Deferrals 402(g) distributions of excess deferral are due to participants.
New Traditional 401k Plan Deadline to adopt a traditional 401k plan for prior year 2024 (C-Corps and Sole props or LLCs taxed as either one) only – for unextended company tax returns
Deductible Contributions C-Corporation (or LLC taxed as C-Corp) and Sole Prop tax return is due, and deductible employer contribution is due unless plan files for a 6 month extension (Form 1120/Form 7004).
June
6/30/25 Corrective Distributions Deadline for ADP/ACP refunds to HCEs for EACA plans to avoid 10% excise tax on the company. Deadline is 6 months after plan year-end.
July
7/31/25 Form 5500 File Form 5500 with the DOL. Due 7 months after calendar plan year end without an extension.
Form 5330 File Form 5330 with the IRS to report excise taxes related to prohibited transactions. Due 7 months after plan year end without an extension.
Form 5558 File Form 5558 with the IRS (Application for Extension of Time to File Certain Employee Plan Returns) is due to request a 2 ½ month extension on the Form 5500, 8955-SSA, and 5330. Form 5558 is due 7 months after plan year end.
Form 8955-SSA File Form 8955-SSA with the IRS via the FIRE SYSTEM. Atessa Benefits files on behalf of plan. Due 7 months after plan year end without an extension.
September
9/15/25 Deductible Contributions Prior year deductible contribution for Partnership and S-Corp (or LLC taxed as S-Corp) filers is due if an extension was timely filed.
New Traditional 401k Plan Deadline to adopt a traditional 401k plan for prior year 2024 (S-Corps and Partnerships or LLCs taxed as either one) only- if CO. tax filing was extended.
9/30/25 Summary Annual Report (SAR) Summary Annual Reports are due the be distributed to participants 9 months after plan year end. This is the due date if the Form 5500 was not extended.
October
10/1/25 Safe Harbor Notice Earliest date Safe Harbor notices due to participants 30-90 days prior to plan year end.
New Safe Harbor Plan Deadline to adopt a new Safe Harbor Plan for 2025.
Automatic Contribution Arrangement (ACA) Notice Earliest date Automatic Enrollment notices due to participants 30-90 days prior to plan year end.
Qualified Default Investment Alternative (QDIA) Notice Earliest date QDIA notice due to participants 30-90 days prior to plan year end.
10/15/25 Form 5500Final deadline to file Form 5500, if it was extended by having timely filed the Form 5558.
Form 8955-SSA Final deadline to file Form 8955-SSA, if it was extended by having timely filed the Form 5558.
New Traditional 401k Plan Deadline to adopt a traditional 401k plan for prior year 2024 (C-Corps and Sole props or LLCs taxed as either one) only – if CO. tax filing was extended.
Deductible Contributions Prior year deductible contribution for C-Corporation (or LLC taxed as C-Corp) filers is due if an extension was timely filed.
Corrective Amendments Plan has 9½ months after plan year end to make corrective amendment to cure a failed coverage test.
November
11/2/25 Simple IRA to 401(k) Plan switch Deadline to Notify SIMPLE IRA participants their plan will terminate Dec 31, in order to adopt a new 401(k) plan for 2026.
11/15/25 Required Minimum Distributions (RMD) RMD calculations begin – Annual recurring RMD distributions are due to participants 73 and older. Administratively, checks may need to be processed well prior to 12/31, so that the checks are dated in 2025.
December
12/1/25 Safe Harbor Notice Final deadline for Safe Harbor match notice to be provided to Plan Participants. Notice is optional for Safe Harbor non-elective plans under SECURE 2.0, unless the employer intends to make mid-year changes to the contribution.
QDIA Notice Final deadline for QDIA notices to be provided to Plan Participants.
ACA Notice Final deadline for ACA notices to be provided to Plan Participants.
12/2/25 Existing 401(k) Plan to Safe Harbor Match Notice Deadline to notify plan participants that the traditional 401(k) Plan will be converted to a SH match. Notices must be handed out today.
Existing 401(k) Plan to 3% Safe Harbor Non-Elective Deadline to adopt the required amendments to covert a traditional 401(k) plan to a 3% non-elective safe harbor for 2025.
12/15/25 Summary Annual Report Final deadline to provide the SAR to Plan Participants if the Form 5500 was timely extended.
12/31/25 Required Minimum Distributions (RMD) Last day RMD checks can be issued
Corrective Distributions Final deadline for ADP/ACP corrections for previous plan year to maintain qualified status. The 10% excise tax applies.
Existing 401(k) Plan to Safe Harbor Amendment Deadline to amend a traditional 401(k) Plan to convert to a SH match for next year 2026.
Existing 401(k) Plan to Safe Harbor Non-Elective for 2024 Amendment Deadline to adopt the required amendments to convert a traditional 401(k) plan to a 4% non-elective safe harbor for 2024.
To be distributed on a continuous basis…
Annually Participant Fee Disclosure Beginning in August 2012, participant fee disclosures must be distributed to participants and beneficiaries once each 12-month period.
As needed Participant Fee Disclosure/Fund Change Any update to the fee information or change to the fund line‑up requires a notice 30-90 days prior to the effective date of the change.
Immediately Summary Plan Description (SPD) To be distributed immediately after participant becomes eligible (within 90 days of entry), and if changes are made to the plan, due 210 days following end of plan year in which the amendment is put into effect.

An ancient Mirador on a hill with a clear view representing Transitioning a retirement plan to Mirador

Timely 401(k) & 403(b) Deposits: Why It Matters and How to Stay Compliant

One key responsibility for businesses offering 401(k) and 403(b) plans is ensuring employee contributions and loan repayments are deposited on time. The Department of Labor (DOL) and IRS closely monitor these transactions, and failing to deposit funds promptly can lead to compliance issues, penalties, and even plan disqualification.

How Soon Do Deposits Need to Be Made?

The general rule is that employee contributions and loan repayments must be deposited as soon as they can reasonably be separated from the company’s general assets. Here’s how that breaks down:

  • For plans with fewer than 100 participants: Deposits made within 7 business days after payroll are considered timely.
  • For plans with 100+ participants: Deposits must be made as soon as possible—often within a day or two after payroll.

Waiting too long—whether due to cash flow delays, payroll process issues, or simple oversight—can create an operational failure that requires correction and could trigger an audit.

What Happens If Deposits Are Late?

Late contributions are flagged on Form 5500, making them a potential red flag for the IRS and DOL. Late deposits can also result in:

  • Lost earnings for employees, which must be calculated and repaid.
  • Excise taxes and penalties on the employer.
  • Increased scrutiny in audits and possible legal risks from participants.

How to Fix Late Deposits

If you’ve missed a deposit deadline, there are ways to correct the issue:

  1. Self-Correction (SCP) – Identify the late deposits, calculate lost earnings, and document process improvements.
  2. Voluntary Correction (VCP) – Report the issue to the IRS and pay a fee to avoid heavier penalties.
  3. DOL Correction (VFCP) – Submit a correction to the DOL, which may waive excise taxes in some cases.

How to Prevent Late Deposits

✔ Set a deposit schedule – Align contributions with your payroll tax payment schedule.
✔ Designate a backup person – Ensure someone else knows the process if your payroll manager is unavailable.
✔ Use automated remittance – Work with a TPA, payroll provider, or financial advisor to streamline the process.

Keeping deposits timely isn’t just a compliance issue—it’s about protecting your employees’ retirement savings and keeping your plan running smoothly. Need guidance? Talk to your TPA or financial advisor to ensure your deposit process is on track.

Earned vs. Passive Income: How It Affects Your Retirement Contributions

When planning for retirement, one of the biggest questions business owners ask is: How much can I contribute to my retirement plan? While it might seem like a simple question based on total earnings, the IRS sets strict rules about what type of income qualifies for retirement contributions. The key distinction? Only earned income counts.

What is Earned Income?

Earned income is money you make from actively working. It includes:

  • W-2 wages or salaries
  • Self-employment income
  • Commissions and bonuses

This income is subject to FICA and Medicare taxes, which is why the IRS allows it to be used as the basis for retirement plan contributions. Whether you’re contributing to a 401(k), Defined Benefit Plan, or pension plan, your contribution limits are based only on this type of income.

What is Passive Income?

Passive income is money that comes from investments or business activities that don’t require your direct involvement. Examples include:

  • Rental income
  • Interest and dividend income
  • Capital gains
  • Business income from an LLC or S-Corp (in some cases)

Because passive income isn’t tied to active work, it does not count when calculating retirement contributions. The IRS assumes that passive income sources, like rental properties or investments, will continue generating income in retirement, making additional tax-advantaged contributions unnecessary.

The K-1 Complexity

If you’re a business owner receiving income through a K-1, the distinction between earned and passive income can be more complicated.

A K-1 reports partnership income, deductions, and credits for tax purposes. While many K-1s only report passive income, others may include self-employment income—which is considered earned income and can be used to calculate retirement contributions. Look at Box 14 of your K-1 to see if it includes self-employment earnings. If it does, that portion of your income may qualify.

Why This Matters for Your Retirement Plan

Understanding the difference between earned and passive income is essential when designing a retirement strategy that maximizes tax-advantaged savings. Many business owners assume they can contribute based on total income, but only earned income applies.

Contribution limits can be complex, and every situation is different. Working with an advisor can help ensure you’re maximizing your ability to save for retirement based on all allowable income sources.

Want a quick estimate of how much you can contribute? Check out our calculator to see what your annual contribution limit might be based on your income and age.