When Is the Last Day to Contribute to a 401(k)?
Understand the varying timelines and processes for optimizing your 401(k) contributions, covering both employee and employer perspectives.
A 401(k) plan is a widely recognized retirement savings vehicle in the United States, allowing individuals to save for their future with significant tax advantages. These plans permit contributions to grow tax-deferred until withdrawal in retirement, or tax-free if contributed to a Roth 401(k). Understanding the mechanics of contributions, including when they can be made, is important for maximizing the benefits.
Understanding Employee Contributions
Employee contributions to a 401(k) plan are typically made through payroll deductions, where a portion of each paycheck is directly allocated to the retirement account. These contributions are tied to the calendar year, meaning they apply to the year in which the wages are earned. The last day for an employee to make contributions for a given tax year is generally December 31st of that year. This deadline applies to both pre-tax and Roth 401(k) contributions, as well as any catch-up contributions for those age 50 or older.
Unlike Individual Retirement Accounts (IRAs), there is no extension to the tax filing deadline for employee 401(k) contributions. The Internal Revenue Service (IRS) sets annual limits on how much an employee can contribute, which are adjusted periodically for inflation. For instance, the employee elective deferral limit for traditional and safe harbor 401(k) plans is $23,500 in 2025.
Understanding Employer Contributions
Employer contributions to a 401(k) plan, such as matching contributions or profit-sharing contributions, operate under different deadlines than employee deferrals. These contributions are distinct from the amounts employees elect to contribute from their own pay. Employers typically have until the due date of their federal income tax return, including any extensions, to make contributions for the previous plan year and deduct them. For example, a company with a calendar fiscal year that extends its tax return might have until September 15th to make deductible contributions for the prior year.
This extended deadline provides employers with flexibility, particularly for those making one-time contributions or profit-sharing allocations. The ability to deduct these contributions for the prior tax year, even if made in the subsequent year, serves as a tax incentive for businesses to contribute to their employees’ retirement. The specific type of employer contribution can also influence the timing requirements for deposit, with some needing to be made by the last day of the plan year or within a certain period after the quarter in which they were earned.
Managing Your Contributions
Individuals manage their 401(k) contributions primarily through their employer’s payroll department or the designated plan administrator. This process typically involves setting up an initial contribution percentage when first enrolling in the plan. Employees can usually adjust this percentage at various times throughout the year, often through an online portal or by submitting a form to human resources. The changes made will then be reflected in subsequent paychecks.
Regularly review current contribution amounts to ensure they align with personal financial goals and to take advantage of any employer matching contributions. Many payroll providers integrate 401(k) plan tasks with payroll administration, automating the transmission of contributions and ensuring timely investment. Reviewing pay stubs and plan statements can confirm that contributions are being processed correctly and deposited into the retirement account.