Keeping up with your small business 401(k) can seem a daunting task–and that’s before you factor in any regulatory changes. But paying close attention to your small business’s 401(k) plan compliance is imperative because you have a legal obligation to ensure your 401(k) plans comply with all relevant regulations.

Failure to comply can result in hefty fines. Noncompliance can also harm the reputation of your business and erode trust among employees. But don’t worry – we make it easy to stay on top of the ever-changing regulatory landscape.

Common 401(k) Plan Compliance Issues

There are several common compliance issues that small business owners should be aware of, including:

  • Failure to deposit employee contributions on time
  • Exceeding contribution limits
  • Discrimination in favor of highly compensated employees
  • Inaccurate plan documentation
  • New legislation mandating certain provisions, such as automatic enrollment
  • Updated contribution limits

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Stay Compliant with 401(k) Plan Regulations

To start, sit down with a compliance calendar and map out all the deadlines you need to meet this year to keep your 401(k) plan in compliance.

The 800 pound gorilla to pay attention to is end-of-year IRS testing. Every plan sponsor must pass these tests to ensure your plan treats all employees fairly.

Called nondiscrimination tests, they are designed to determine if highly compensated employees are able to save money for retirement at a rate that is disproportionately favorable compared to the rate at which rank-and-file employees can save.

Small business owners can stay compliant with 401(k) nondiscrimination testing rules by:

  • Understanding what a highly compensated employee is.
  • Encouraging rank-and-file employee participation.
  • Designing a plan with employer contributions that automatically passes IRS testing by choosing a Safe Harbor plan.
  • Keeping up with annual IRS changes.

If you’re running a small business, working with an experienced retirement plan administrator for your 401(k) planning needs is another great way to set your plan up for success.

Consider Outsourcing 401(k) Plan Administration

One way for small businesses to stay compliant with 401(k) plan regulations is to outsource plan administration to a reputable provider (hi, we’re Ubiquity). Some of the benefits of outsourcing include:

  • Expertise: We have a team of small business 401(k) experts who know the ins and outs of 401(k) plan regulations and can help ensure that plans remain in compliance.
  • Time savings: Plan administration can be time-consuming, particularly for small businesses with limited resources.
  • Reduced risk: By outsourcing plan administration, you can reduce your risk of noncompliance and the associated fines and other unpleasant consequences.

These issues can be challenging for small business owners to navigate, particularly if you do not have an in-house HR or compliance team. Get in touch with us today–we’ll help make sure your small business stays on the right path.


Ubiquity is not a registered investment advisor and no portion of the material herein should be construed as legal or tax advice. Please consult with your financial planner, attorney and/or tax advisor for advice.

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Contact Jay Jacob, Sr. Retirement Plan Consultant

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San Francisco, CA 94104

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© 2023 Ubiquity Retirement + Savings
Privacy Policy
44 Montgomery Street, Suite 300
San Francisco, CA 94104