When Are 401k Contributions Due for Employees & Employers?

Adhering to 401(k) contribution deadlines is important for both individuals and businesses. These retirement plans involve specific timelines that, if not met, can lead to complications. Adhering to these schedules helps ensure compliance with regulations and supports effective financial planning. Being aware of when contributions are due allows participants and plan sponsors to manage their responsibilities and maximize plan benefits.

Employee Deferral Deadlines

Employee salary deferrals into a 401(k) plan are governed by specific regulations. The Department of Labor (DOL) mandates that these contributions must be deposited “as soon as administratively feasible.” This generally means the funds should be separated from the employer’s general assets and deposited into the plan as quickly as possible following payroll processing.

While “as soon as administratively feasible” can vary, the DOL typically expects deposits within a few days, often three to five business days, after the payroll date. For smaller plans, specifically those with fewer than 100 participants on the first day of the plan year, the DOL provides a safe harbor rule. Under this rule, deposits made within seven business days following the payroll date are considered timely.

Larger plans, however, do not benefit from this specific safe harbor and are held to the stricter “as soon as administratively feasible” standard, which may imply an even shorter timeframe based on the employer’s capacity. It is important to note that these deadlines for employee deferrals are directly tied to payroll processing and regulatory compliance, not to the employer’s tax filing deadline. Failure to meet these deadlines can result in penalties and a requirement for the employer to fund any lost earnings.

Employer Contribution Deadlines

Employer contributions to a 401(k) plan, which include matching contributions and discretionary profit-sharing contributions, typically adhere to a different set of deadlines focused on tax deductibility. To be deductible for a given tax year, these contributions must generally be made by the employer’s tax filing deadline for that year, including any extensions.

For businesses structured as S-Corporations or Partnerships, the tax filing deadline is typically March 15th. Conversely, C-Corporations and Sole Proprietorships generally have an April 15th tax filing deadline. Filing an extension for the business tax return automatically extends the deadline for making these employer contributions, usually by an additional six months, to September 15th for S-Corps and Partnerships, and October 15th for C-Corps and Sole Proprietorships.

Both required matching contributions and discretionary profit-sharing contributions follow these tax-filing deadlines for deductibility. This allows businesses flexibility in funding their contributions while ensuring they can claim the associated tax benefits for the correct tax year.

Connecting Contributions to Tax Deadlines

The relationship between employer 401(k) contributions and tax deductibility is a significant consideration. To be deductible for a tax year, contributions must be deposited by the employer’s tax filing deadline, including extensions. This rule, outlined in IRS guidance like IRC Section 404, ensures businesses properly account for retirement plan expenses.

Missing this deadline means the employer cannot deduct the contribution for the prior tax year. The contribution would instead become deductible in the subsequent tax year, potentially altering the business’s tax liability and financial planning.

This applies to employer-funded contributions like matching and profit-sharing, which aim for a tax deduction for the business. Employee salary deferrals operate under different rules regarding their timing and tax implications. These amounts are considered employee wages and are not subject to the same tax-deductibility timing constraints as employer-funded contributions. Employee deferrals focus on timely fund transfer, while employer contributions are strategically linked to business tax planning.