What Is the 401k Contribution Deadline?
Your 401k contribution deadline depends on who is contributing. Understand the key timing differences to effectively plan your retirement savings and tax strategy.
A 401(k) plan offers a tax-advantaged way to save for retirement, but contributions are governed by strict deadlines. These timelines differ depending on whether you are an employee, an employer making contributions for your staff, or a self-employed individual with a Solo 401(k). The deadlines determine when funds must be deposited to count for a specific tax year, impacting your annual tax deduction and long-term investment growth.
Employee Contribution Deadlines
For most employees, the deadline to contribute to a 401(k) plan is December 31. These contributions, known as elective deferrals, are deducted directly from your paycheck. Because of this, the practical deadline is your final paycheck of the year, so you should plan any changes to your contribution amount in advance to ensure they are processed in time.
Unlike Individual Retirement Arrangements (IRAs), you cannot make prior-year contributions to your 401(k). All employee contributions for a given tax year must be made by December 31. If you contribute more than the annual limit of $23,000 for 2024, you must withdraw the excess by April 15 of the following year to avoid tax penalties.
Individuals age 50 and over are eligible to make additional catch-up contributions. For 2024, this amount is $7,500, allowing for a total employee contribution of $30,500. The deadline for these catch-up contributions is also December 31 and they are made through payroll deductions, so adjustments must be arranged with your employer before the final pay cycle.
The process is automated through your employer’s payroll system based on your elected deferral rate. This election remains in place until you change it. Therefore, meeting the deadline is about ensuring your desired rate is set correctly in time for your last paycheck.
Employer Contribution Deadlines
The timeline for employers to make contributions to their employees’ 401(k) accounts is more flexible than the employee deadline. Employer contributions, including matching funds or profit-sharing, can be made up until the due date of the business’s federal income tax return, including extensions. For a business on a calendar year, the deadline for 2024 contributions is April 15, 2025, or later if an extension is filed.
This extended deadline allows a company to wait until after the fiscal year closes to determine its final profit-sharing contribution based on financial performance. The contribution is still deductible on the business’s tax return for the year in which it was accrued, even if deposited in the following year.
Employer matching contributions are often tied directly to employee deferrals and may be deposited with each payroll period. However, the plan documents dictate the specific timing. Some plans specify that the employer match will be contributed in a lump sum after the year has ended, as long as it is deposited before the company’s tax filing deadline. The total of employer matching and profit-sharing contributions is limited to 25% of the total eligible employee compensation.
It is the employer’s responsibility to ensure these contributions are deposited into the correct employee accounts by the deadline. Late deposits can result in penalties and require corrective actions under programs established by the Internal Revenue Service (IRS), such as the Employee Plans Compliance Resolution System (EPCRS). This system allows plan sponsors to correct mistakes and avoid plan disqualification.
Deadlines for Self-Employed Individuals
Self-employed individuals with no employees other than a spouse can use a Solo 401(k), which has its own deadlines. To make contributions for a specific tax year, the Solo 401(k) plan must be formally established by December 31 of that year. Missing this setup deadline can prevent you from making any contributions for that year.
A Solo 401(k) allows for contributions as both the “employee” and the “employer.” The deadline for the employee portion, or salary deferral, has two parts. The election to make the contribution must be formally documented by December 31. However, the actual deposit of these funds can be delayed until the individual’s personal tax filing deadline, which is typically April 15 of the following year.
The employer portion of the contribution, which is a profit-sharing contribution, offers even more flexibility. This contribution can be made up until the business’s tax filing deadline, including extensions. For a sole proprietorship, this could be as late as October 15 if a tax extension is filed. This allows the business owner to finalize their business income for the year before committing to a final contribution amount.
As the “employee,” you can contribute up to $23,000 in 2024, or $30,500 if age 50 or over. As the “employer,” you can contribute up to 25% of compensation for corporations or about 20% of net self-employment income for sole proprietorships. The combined contributions cannot exceed the overall limit of $69,000 for 2024.