🕷️ Crawler Inspector

URL Lookup

Direct Parameter Lookup

Raw Queries and Responses

1. Shard Calculation

Query:

Response:

Calculated Shard: 119 (from laksa029)

2. Crawled Status Check

Query:

curl -X POST \
  'http://laksa119.int.ahrefs:8124/' \
  -H 'Content-Type: text/plain' \
  -H 'X-ClickHouse-Database: crawler3' \
  -H 'Authorization: Basic YXBpOg==' \
  -d 'SELECT getAhrefsURLFromUnparsed(src_unparsed) AS found_url, ifNull(toUnixTimestamp(download_stamp), 0) AS crawl_time, ifNull(toUnixTimestamp(props_url_first_seen), 0) AS first_indexed_time, download_http_code AS http_code, src_unparsed AS src_unparsed, src_root_hash AS src_root_hash, history_drop_reason AS history_drop_reason, meta_title AS meta_title, meta_descriptions AS meta_descriptions, attrs_boilerpipe_text AS attrs_boilerpipe_text, attrs_markdown AS attrs_markdown, attrs_readable_markdown AS attrs_readable_markdown, meta_canonical AS meta_canonical FROM crawler3.page_info_local FINAL PREWHERE (src_root_hash, src_unparsed) IN ((getAhrefsRootHashFromUnparsed(getAhrefsUnparsedNoserviceFromURL(\'https://www.irs.gov/retirement-plans/operating-a-401k-plan\')), getAhrefsUnparsedNoserviceFromURL(\'https://www.irs.gov/retirement-plans/operating-a-401k-plan\'))) FORMAT JSONEachRow'

Response:

{"found_url":"https:\/\/www.irs.gov\/retirement-plans\/operating-a-401k-plan","crawl_time":1775780358,"first_indexed_time":1499543918,"http_code":200,"src_unparsed":"gov,irs!www,\/retirement-plans\/operating-a-401k-plan s443","src_root_hash":"796284942891862319","history_drop_reason":null,"meta_title":"Operating a 401(k) plan | Internal Revenue Service","meta_descriptions":["Plan operational elements that need to be handled by employers who have established 401(k) plans."],"attrs_boilerpipe_text":"Once you have established a 401(k) plan, you assume certain responsibilities in operating the plan. If you hired someone to help in setting up your plan, that arrangement also may have included help in operating the plan. If not, another important decision will be whether to manage the plan yourself or to hire a professional or financial institution - such as a bank, mutual fund provider, or insurance company - to take care of some or most aspects of operating the plan. Elements of a plan that need to be handled include:\nParticipation\nContributions\nVesting\nNondiscrimination\nInvesting 401(k) monies\nFiduciary responsibilities\nDisclosing plan information to participants\nReporting to government agencies\nDistributing plan benefits\nCompliance\nParticipation\nTypically, a plan includes a mix of rank-and-file employees and owner\/managers. However, some employees may be excluded from a 401(k) plan if they:\nHave not attained age 21;\nHave not completed a year of service; or\nAre covered by a collective bargaining agreement that does not provide for participation in the plan, if retirement benefits were the subject of good faith bargaining.\nEmployees cannot be excluded from a plan merely because they are older workers.\nContributions\nAnother design option you will have in establishing and operating a 401(k) plan is deciding on your business’s contribution (if any) to participants’ accounts in the plan.\nTraditional 401(k) plan\nIf you decide to contribute to your 401(k) plan, you have further options. You can contribute a percentage of each employee’s compensation to the employee’s account (called a nonelective contribution), you can match the amount your employees decide to contribute (within the limits of current law) or you can do both.\nFor example, you may decide to add a percentage- say 50 percent- to an employee’s contribution, which results in a 50-cent increase for every dollar the employee sets aside. Using a matching contribution formula will provide additional employer contributions only to employees who make deferrals to the 401(k) plan. If you choose to make nonelective contributions, the employer makes a contribution for each eligible participant, whether or not the participant decides to make a salary deferral to his or her 401(k) account.\nUnder a traditional 401(k) plan, you have the flexibility of changing the amount of nonelective contributions each year, according to business conditions.\nSafe harbor 401(k) plan\nUnder a safe harbor plan, you can match each eligible employee’s contribution, dollar-for-dollar, up to 3 percent of the employee’s compensation, and 50 cents on the dollar for the employee’s contribution that exceeds 3 percent, but not 5 percent, of the employee’s compensation. Alternatively, you can make a nonelective contribution equal to 3 percent of compensation to each eligible employee’s account. Each year you must make either the matching contributions or the nonelective contributions.\nAutomatic enrollment 401(k)\nUnder an automatic enrollment 401(k) plan with a qualified automatic contribution arrangement, the plan is exempt from the annual IRS testing requirement that a traditional 401(k) plan must perform. The initial automatic employee contribution must be at least 3 percent of compensation. Contributions may have to automatically increase so that, by the fifth year, the automatic employee contribution is at least 6 percent of compensation.\nThe automatic employee contributions cannot exceed 10 percent of compensation in any year. The employee is permitted to change the amount of his or her employee contributions or choose not to contribute but must do so by making an affirmative election.\nThe employer must make at least either:\nA matching contribution of 100 percent for salary deferrals up to 1 percent of compensation and a 50 percent match for all salary deferrals above 1 percent but no more than 6 percent of compensation; or\nA nonelective contribution of 3 percent of compensation to all participants\nSIMPLE 401(k) plan\nEmployer contributions to a SIMPLE 401(k) plan are limited to either:\nA dollar-for-dollar matching contribution, up to 3 percent of pay; or\nA nonelective contribution of 2 percent of pay for each eligible employee.\nNo other employer contributions can be made to a SIMPLE 401(k) plan, and employees cannot participate in any other retirement plan of the employer.\nThe maximum amount that employees can contribute to their SIMPLE 401(k) accounts is $16,000 in 2024 ($15,500 in 2023, $14,000 in 2022, $13,500 in 2021 and in 2020 and $13,000 in 2019). See \nannual cost-of-living updates\n for more information.\nAn additional catch-up contribution is allowed for employees aged 50 and over. The additional contribution amount is $3,500 in 2023 and 2024 ($3,000 in 2022, 2021, 2020 and 2019).\nContribution limits\nTotal employer and employee contributions to all of an employer’s plans are subject to an overall annual limitation - the lesser of:\n100 percent of the employee’s compensation, or\n$69,000 for 2024 ($66,000 for 2023; $61,000 for 2022; $58,000 for 2021; $57,000 for 2020; $56,000 for 2019).\nThe amount employees can contribute under a traditional, safe harbor or automatic enrollment 401(k) plan is limited to $23,000 in 2024 ($22,500 in 2023, $20,500 in 2022, $19,500 in 2021 and in 2020 and $19,000 in 2019).\nTraditional, safe harbor and automatic enrollment 401(k) plans can allow additional catch-up contributions in the amount of $7,500 in 2023 and 2024, $6,500 in 2022, 2021 and in 2020 and $6,000 in 2019 for employees aged 50 and over.\nVesting\nEmployee salary deferrals are immediately 100 percent vested- that is, the money that an employee has put aside through salary deferrals cannot be forfeited. When an employee leaves employment, he\/she is entitled to those deferrals, plus any investment gains (or minus losses) on their deferrals.\nIn SIMPLE 401(k) plans and safe harbor 401(k) plans, all required employer contributions are always 100 percent vested.\nIn traditional 401(k) plans, you can design your plan so that employer contributions become vested over time, according to a vesting schedule.\nNondiscrimination\nRealizing 401(k) plan tax benefits requires that plans provide substantive benefits for rank-and-file employees, not only for business owners and managers. These requirements are referred to as nondiscrimination rules and cover the level of plan benefits for rank-and-file employees compared to owners\/managers.\nTraditional 401(k) plans are subject to annual testing to ensure that the amount of contributions made on behalf of rank-and-file employees is proportional to contributions made on behalf of owners and managers. Safe harbor 401(k) plans and SIMPLE 401(k) plans are not subject to annual nondiscrimination testing.\nInvesting 401(k) monies\nAfter you decide on the type of 401(k) plan, you can consider the variety of investment options. One decision you will need to make in designing a plan is whether to permit your employees to direct the investment of their accounts or to manage the monies on their behalf. If you choose the former, you also need to decide what investment options to make available to the participants. Depending on the plan design you choose, you may want to hire someone either to determine the investment options to make available or to manage the plan’s investments. Continually monitoring the investment options ensures that your selections remain in the best interests of your plan and its participants.\nDisclosing plan information to participants\nPlan disclosure documents keep participants informed about the basics of plan operation, alert them to changes in the plan’s structure and operations, and provide them a chance to make decisions and take timely action with respect to their accounts.\nThe\nsummary plan description (SPD)\n- the basic descriptive document - is a plain-language explanation of the plan and must be comprehensive enough to apprise participants of their rights and responsibilities under the plan. It also informs participants about the plan features and what to expect of the plan. Among other things, the SPD must include information about:\nWhen and how employees become eligible to participate in the 401(k) plan;\nThe contributions to the plan;\nHow long it takes to become vested;\nWhen employees are eligible to receive their benefits;\nHow to file a claim for those benefits; and\nBasic rights and responsibilities participants have under the Federal retirement law, the Employee Retirement Income Security Act (ERISA).\nThe SPD should include an explanation about the administrative expenses that will be paid by the plan. This document must be given to participants when they join the plan and to beneficiaries when they first receive benefits. SPDs must also be redistributed periodically during the life of the plan.\nA\nsummary of material modification (SMM)\napprises participants of changes made to the plan or to the information required to be in the SPD. The SMM or an updated SPD must be automatically furnished to participants within a specified number of days after the change.\nAn\nindividual benefit statement (IBS)\nshows the total plan benefits earned by a participant, vested benefits, the value of each investment in the account, information describing the ability to direct investments, and (for plans with participant-direction) an explanation of the importance of a diversified portfolio. Plans that provide for participant directed accounts must furnish individual account statements on a quarterly basis. Plans that do not provide for participant direction must furnish statements annually.\nA\nsummary annual report (SAR)\nis a narrative of the plan’s annual return\/report, the Form 5500, filed with the Federal government (see\nReporting to Government Agencies\nfor more information). It must be furnished annually to participants.\nA\nblackout period notice\ngives employees advance notice when a blackout period occurs, typically when plans change recordkeepers or investment options, or when plans add participants due to corporate mergers or acquisitions. During a blackout period, participants’ rights to direct investments, take loans, or obtain distributions are suspended.\nReporting to government agencies\nIn addition to the disclosure documents that provide information to participants, plans must also report certain information to government entities.\nForm 5500 series\nPlans are required to file an annual return\/report with the Federal government. Depending on the number and type of participants covered, most401(k) plans must file one of the two following forms:\nForm 5500, Annual Return\/Report of Employee Benefit Plan\n, or\nForm 5500-EZ, Annual Return of One-Participant (Owners and Spouses) Retirement Plan\nPDF\nFor 401(k) plans, the Form 5500 is designed to disclose information about the plan and its operation to the IRS, the U.S. Department of Labor, plan participants, and the public.\nMost one-participant plans (sole proprietor and partnership plans) with total assets of $250,000 or less are exempt from the annual filing requirement. A final return\/report must be filed when a plan is terminated regardless of the value of the plan’s assets.\nForm 1099-R\nForm 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.\nPDF\nis given to both the IRS and recipients of distributions from the plan during the year. It is used to report distributions (including rollovers) from a retirement plan.\nDistributing plan benefits\nBenefits in a 401(k) plan are dependent on a participant’s account balance at the time of distribution.\nWhen participants are eligible to receive a distribution, they typically can elect to:\nTake a lump sum distribution of their account,\nRoll over their account to an IRA or another employer’s retirement plan, or\nPurchase an annuity.\nCompliance\nEven with the best intentions, mistakes in plan operation can still happen. The U.S. Department of Labor and IRS have correction programs to help 401(k) plan sponsors\ncorrect plan errors\n, protect participants, and keep plan's tax benefits. These programs are structured to encourage you to correct the errors early. Having an ongoing review program makes it easier to spot and correct mistakes in plan operations.\nBack to top","attrs_markdown":"[Skip to main content](https:\/\/www.irs.gov\/retirement-plans\/operating-a-401k-plan#main-content)\n\n![](https:\/\/www.irs.gov\/themes\/custom\/pup_base\/images\/us_flag_small.png)\n\nAn official website of the United States government\n\nHere's how you know\n\nHere's how you know\n\n![](https:\/\/www.irs.gov\/themes\/custom\/pup_base\/images\/icon-dot-gov.svg)\n\n**Official websites use .gov**\n\nA **.gov** website belongs to an official government organization in the United States.\n\n![](https:\/\/www.irs.gov\/themes\/custom\/pup_base\/images\/icon-https.svg)\n\n**Secure .gov websites use HTTPS**\n\nA **lock** (![Locked padlock icon](https:\/\/www.irs.gov\/themes\/custom\/pup_base\/images\/lock.svg)) or **https:\/\/** means you've safely connected to the .gov website. Share sensitive information only on official, secure websites.\n\n[![Home](https:\/\/www.irs.gov\/themes\/custom\/pup_base\/IRS-Logo.svg) ![Home](https:\/\/www.irs.gov\/themes\/custom\/pup_irs\/images\/logo-print.svg)](https:\/\/www.irs.gov\/ \"Home\")\n\n## Information Menu\n- [Help](https:\/\/www.irs.gov\/help\/let-us-help-you \"Help\")\n- [News](https:\/\/www.irs.gov\/newsroom \"News\")\n- English\n  \n  - [Español](https:\/\/www.irs.gov\/es\/retirement-plans\/operating-a-401k-plan)\n  - [中文 (简体)](https:\/\/www.irs.gov\/zh-hans\/retirement-plans\/operating-a-401k-plan)\n  - [中文 (繁體)](https:\/\/www.irs.gov\/zh-hant\/retirement-plans\/operating-a-401k-plan)\n  - [한국어](https:\/\/www.irs.gov\/ko\/retirement-plans\/operating-a-401k-plan)\n  - [Русский](https:\/\/www.irs.gov\/ru\/retirement-plans\/operating-a-401k-plan)\n  - [Tiếng Việt](https:\/\/www.irs.gov\/vi\/retirement-plans\/operating-a-401k-plan)\n  - [Kreyòl 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[Home](https:\/\/www.irs.gov\/)\n2. [Retirement Plans](https:\/\/www.irs.gov\/retirement-plans)\n3. Operating a 401(k) plan\n# Operating a 401(k) plan\n\n### More In Retirement Plans\n- [IRAs](https:\/\/www.irs.gov\/retirement-plans\/individual-retirement-arrangements-iras \"IRAs\")\n- [Types of retirement plans](https:\/\/www.irs.gov\/retirement-plans\/plan-sponsor\/types-of-retirement-plans \"Types of retirement plans\")\n- [Required minimum distributions](https:\/\/www.irs.gov\/retirement-plans\/plan-participant-employee\/retirement-topics-required-minimum-distributions-rmds \"Required minimum distributions\")\n- [Published guidance](https:\/\/www.irs.gov\/retirement-plans\/published-guidance \"Published guidance\")\n- [Forms and publications](https:\/\/www.irs.gov\/retirement-plans\/retirement-plan-forms-and-publications \"Forms and publications\")\n- [Operate a retirement plan](https:\/\/www.irs.gov\/retirement-plans\/operate-a-retirement-plan \"Operate a retirement plan\")\n- [News](https:\/\/www.irs.gov\/retirement-plans\/newsletters \"News\")\n- [Topic index](https:\/\/www.irs.gov\/retirement-plans\/plan-participant-employee\/retirement-topics \"Topic index\")\n\nOnce you have established a 401(k) plan, you assume certain responsibilities in operating the plan. If you hired someone to help in setting up your plan, that arrangement also may have included help in operating the plan. If not, another important decision will be whether to manage the plan yourself or to hire a professional or financial institution - such as a bank, mutual fund provider, or insurance company - to take care of some or most aspects of operating the plan. Elements of a plan that need to be handled include:\n\n- [Participation](https:\/\/www.irs.gov\/retirement-plans\/operating-a-401k-plan#participation)\n- [Contributions](https:\/\/www.irs.gov\/retirement-plans\/operating-a-401k-plan#contributions)\n- [Vesting](https:\/\/www.irs.gov\/retirement-plans\/operating-a-401k-plan#vesting)\n- [Nondiscrimination](https:\/\/www.irs.gov\/retirement-plans\/operating-a-401k-plan#nondiscrimination)\n- [Investing 401(k) monies](https:\/\/www.irs.gov\/retirement-plans\/operating-a-401k-plan#investing)\n- [Fiduciary responsibilities](https:\/\/www.irs.gov\/retirement-plans\/retirement-plan-fiduciary-responsibilities \"Retirement plan fiduciary responsibilities\")\n- [Disclosing plan information to participants](https:\/\/www.irs.gov\/retirement-plans\/operating-a-401k-plan#disclosing)\n- [Reporting to government agencies](https:\/\/www.irs.gov\/retirement-plans\/operating-a-401k-plan#reporting)\n- [Distributing plan benefits](https:\/\/www.irs.gov\/retirement-plans\/operating-a-401k-plan#distributing)\n- [Compliance](https:\/\/www.irs.gov\/retirement-plans\/operating-a-401k-plan#compliance)\n***\n## Participation\nTypically, a plan includes a mix of rank-and-file employees and owner\/managers. However, some employees may be excluded from a 401(k) plan if they:\n\n- Have not attained age 21;\n- Have not completed a year of service; or\n- Are covered by a collective bargaining agreement that does not provide for participation in the plan, if retirement benefits were the subject of good faith bargaining.\n\nEmployees cannot be excluded from a plan merely because they are older workers.\n***\n## Contributions\nAnother design option you will have in establishing and operating a 401(k) plan is deciding on your business’s contribution (if any) to participants’ accounts in the plan.\n\n### Traditional 401(k) plan\nIf you decide to contribute to your 401(k) plan, you have further options. You can contribute a percentage of each employee’s compensation to the employee’s account (called a nonelective contribution), you can match the amount your employees decide to contribute (within the limits of current law) or you can do both.\n\nFor example, you may decide to add a percentage- say 50 percent- to an employee’s contribution, which results in a 50-cent increase for every dollar the employee sets aside. Using a matching contribution formula will provide additional employer contributions only to employees who make deferrals to the 401(k) plan. If you choose to make nonelective contributions, the employer makes a contribution for each eligible participant, whether or not the participant decides to make a salary deferral to his or her 401(k) account.\n\nUnder a traditional 401(k) plan, you have the flexibility of changing the amount of nonelective contributions each year, according to business conditions.\n\n### Safe harbor 401(k) plan\nUnder a safe harbor plan, you can match each eligible employee’s contribution, dollar-for-dollar, up to 3 percent of the employee’s compensation, and 50 cents on the dollar for the employee’s contribution that exceeds 3 percent, but not 5 percent, of the employee’s compensation. Alternatively, you can make a nonelective contribution equal to 3 percent of compensation to each eligible employee’s account. Each year you must make either the matching contributions or the nonelective contributions.\n\n### Automatic enrollment 401(k)\nUnder an automatic enrollment 401(k) plan with a qualified automatic contribution arrangement, the plan is exempt from the annual IRS testing requirement that a traditional 401(k) plan must perform. The initial automatic employee contribution must be at least 3 percent of compensation. Contributions may have to automatically increase so that, by the fifth year, the automatic employee contribution is at least 6 percent of compensation.\n\nThe automatic employee contributions cannot exceed 10 percent of compensation in any year. The employee is permitted to change the amount of his or her employee contributions or choose not to contribute but must do so by making an affirmative election.\n\nThe employer must make at least either:\n\n- A matching contribution of 100 percent for salary deferrals up to 1 percent of compensation and a 50 percent match for all salary deferrals above 1 percent but no more than 6 percent of compensation; or\n- A nonelective contribution of 3 percent of compensation to all participants\n### SIMPLE 401(k) plan\nEmployer contributions to a SIMPLE 401(k) plan are limited to either:\n\n1. A dollar-for-dollar matching contribution, up to 3 percent of pay; or\n2. A nonelective contribution of 2 percent of pay for each eligible employee.\n\nNo other employer contributions can be made to a SIMPLE 401(k) plan, and employees cannot participate in any other retirement plan of the employer.\n\nThe maximum amount that employees can contribute to their SIMPLE 401(k) accounts is \\$16,000 in 2024 (\\$15,500 in 2023, \\$14,000 in 2022, \\$13,500 in 2021 and in 2020 and \\$13,000 in 2019). See [annual cost-of-living updates](https:\/\/www.irs.gov\/retirement-plans\/cola-increases-for-dollar-limitations-on-benefits-and-contributions \"COLA increases for dollar limitations on benefits and contributions\") for more information.\n\nAn additional catch-up contribution is allowed for employees aged 50 and over. The additional contribution amount is \\$3,500 in 2023 and 2024 (\\$3,000 in 2022, 2021, 2020 and 2019).\n\n### Contribution limits\nTotal employer and employee contributions to all of an employer’s plans are subject to an overall annual limitation - the lesser of:\n\n- 100 percent of the employee’s compensation, or\n- \\$69,000 for 2024 (\\$66,000 for 2023; \\$61,000 for 2022; \\$58,000 for 2021; \\$57,000 for 2020; \\$56,000 for 2019).\n\nThe amount employees can contribute under a traditional, safe harbor or automatic enrollment 401(k) plan is limited to \\$23,000 in 2024 (\\$22,500 in 2023, \\$20,500 in 2022, \\$19,500 in 2021 and in 2020 and \\$19,000 in 2019).\n\nTraditional, safe harbor and automatic enrollment 401(k) plans can allow additional catch-up contributions in the amount of \\$7,500 in 2023 and 2024, \\$6,500 in 2022, 2021 and in 2020 and \\$6,000 in 2019 for employees aged 50 and over.\n***\n## Vesting\nEmployee salary deferrals are immediately 100 percent vested- that is, the money that an employee has put aside through salary deferrals cannot be forfeited. When an employee leaves employment, he\/she is entitled to those deferrals, plus any investment gains (or minus losses) on their deferrals.\n\nIn SIMPLE 401(k) plans and safe harbor 401(k) plans, all required employer contributions are always 100 percent vested.\n\nIn traditional 401(k) plans, you can design your plan so that employer contributions become vested over time, according to a vesting schedule.\n***\n## Nondiscrimination\nRealizing 401(k) plan tax benefits requires that plans provide substantive benefits for rank-and-file employees, not only for business owners and managers. These requirements are referred to as nondiscrimination rules and cover the level of plan benefits for rank-and-file employees compared to owners\/managers.\n\nTraditional 401(k) plans are subject to annual testing to ensure that the amount of contributions made on behalf of rank-and-file employees is proportional to contributions made on behalf of owners and managers. Safe harbor 401(k) plans and SIMPLE 401(k) plans are not subject to annual nondiscrimination testing.\n***\n## Investing 401(k) monies\nAfter you decide on the type of 401(k) plan, you can consider the variety of investment options. One decision you will need to make in designing a plan is whether to permit your employees to direct the investment of their accounts or to manage the monies on their behalf. If you choose the former, you also need to decide what investment options to make available to the participants. Depending on the plan design you choose, you may want to hire someone either to determine the investment options to make available or to manage the plan’s investments. Continually monitoring the investment options ensures that your selections remain in the best interests of your plan and its participants.\n***\n## Disclosing plan information to participants\nPlan disclosure documents keep participants informed about the basics of plan operation, alert them to changes in the plan’s structure and operations, and provide them a chance to make decisions and take timely action with respect to their accounts.\n\nThe **summary plan description (SPD)**\\- the basic descriptive document - is a plain-language explanation of the plan and must be comprehensive enough to apprise participants of their rights and responsibilities under the plan. It also informs participants about the plan features and what to expect of the plan. Among other things, the SPD must include information about:\n\n- When and how employees become eligible to participate in the 401(k) plan;\n- The contributions to the plan;\n- How long it takes to become vested;\n- When employees are eligible to receive their benefits;\n- How to file a claim for those benefits; and\n- Basic rights and responsibilities participants have under the Federal retirement law, the Employee Retirement Income Security Act (ERISA).\n\nThe SPD should include an explanation about the administrative expenses that will be paid by the plan. This document must be given to participants when they join the plan and to beneficiaries when they first receive benefits. SPDs must also be redistributed periodically during the life of the plan.\n\nA **summary of material modification (SMM)** apprises participants of changes made to the plan or to the information required to be in the SPD. The SMM or an updated SPD must be automatically furnished to participants within a specified number of days after the change.\n\nAn **individual benefit statement (IBS)** shows the total plan benefits earned by a participant, vested benefits, the value of each investment in the account, information describing the ability to direct investments, and (for plans with participant-direction) an explanation of the importance of a diversified portfolio. Plans that provide for participant directed accounts must furnish individual account statements on a quarterly basis. Plans that do not provide for participant direction must furnish statements annually.\n\nA **summary annual report (SAR)** is a narrative of the plan’s annual return\/report, the Form 5500, filed with the Federal government (see *Reporting to Government Agencies* for more information). It must be furnished annually to participants.\n\nA **blackout period notice** gives employees advance notice when a blackout period occurs, typically when plans change recordkeepers or investment options, or when plans add participants due to corporate mergers or acquisitions. During a blackout period, participants’ rights to direct investments, take loans, or obtain distributions are suspended.\n***\n## Reporting to government agencies\nIn addition to the disclosure documents that provide information to participants, plans must also report certain information to government entities.\n\n### Form 5500 series\nPlans are required to file an annual return\/report with the Federal government. Depending on the number and type of participants covered, most401(k) plans must file one of the two following forms:\n\n[Form 5500, Annual Return\/Report of Employee Benefit Plan](https:\/\/www.dol.gov\/agencies\/ebsa\/employers-and-advisers\/plan-administration-and-compliance\/reporting-and-filing\/forms \"Form 5500, Annual Return\/Report of Employee Benefit Plan\"), or  \n [Form 5500-EZ, Annual Return of One-Participant (Owners and Spouses) Retirement Plan PDF](https:\/\/www.irs.gov\/pub\/irs-pdf\/f5500ez.pdf \"2025 Form 5500-EZ                        (PDF)\")\n\nFor 401(k) plans, the Form 5500 is designed to disclose information about the plan and its operation to the IRS, the U.S. Department of Labor, plan participants, and the public.\n\nMost one-participant plans (sole proprietor and partnership plans) with total assets of \\$250,000 or less are exempt from the annual filing requirement. A final return\/report must be filed when a plan is terminated regardless of the value of the plan’s assets.\n\n### Form 1099-R\n[Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. PDF](https:\/\/www.irs.gov\/pub\/irs-pdf\/f1099r.pdf \"2025 Form 1099-R                         (PDF)\")is given to both the IRS and recipients of distributions from the plan during the year. It is used to report distributions (including rollovers) from a retirement plan.\n***\n## Distributing plan benefits\nBenefits in a 401(k) plan are dependent on a participant’s account balance at the time of distribution.\n\nWhen participants are eligible to receive a distribution, they typically can elect to:\n\n- Take a lump sum distribution of their account,\n- Roll over their account to an IRA or another employer’s retirement plan, or\n- Purchase an annuity.\n***\n## Compliance\nEven with the best intentions, mistakes in plan operation can still happen. The U.S. Department of Labor and IRS have correction programs to help 401(k) plan sponsors [correct plan errors](https:\/\/www.irs.gov\/retirement-plans\/401k-plan-fix-it-guide \"401(k) plan fix-it guide\"), protect participants, and keep plan's tax benefits. These programs are structured to encourage you to correct the errors early. Having an ongoing review program makes it easier to spot and correct mistakes in plan operations.\n\n[Back to top](https:\/\/www.irs.gov\/retirement-plans\/operating-a-401k-plan#top)\n\nPage Last Reviewed or Updated: 26-Aug-2025\n\n- [Share](https:\/\/www.irs.gov\/retirement-plans\/operating-a-401k-plan)\n  - [Facebook](https:\/\/www.irs.gov\/#facebook)\n  - [Twitter](https:\/\/www.irs.gov\/#twitter)\n  - [Linkedin](https:\/\/www.irs.gov\/#linkedin)\n- Print\n\n## Footer Navigation\n- Our Agency\n  - [About IRS](https:\/\/www.irs.gov\/about-irs)\n  - [Careers](https:\/\/jobs.irs.gov\/)\n  - [Operations and Budget](https:\/\/www.irs.gov\/statistics\/soi-tax-stats-irs-operations-and-budget)\n  - [Tax Statistics](https:\/\/www.irs.gov\/statistics)\n  - [Help](https:\/\/www.irs.gov\/help\/let-us-help-you)\n  - [Find a Local Office](https:\/\/www.irs.gov\/help\/contact-your-local-irs-office)\n- Know Your Rights\n  - [Taxpayer Bill of Rights](https:\/\/www.irs.gov\/taxpayer-bill-of-rights)\n  - [Taxpayer Advocate Service](https:\/\/www.irs.gov\/taxpayer-advocate)\n  - [Independent Office of Appeals](https:\/\/www.irs.gov\/appeals)\n  - [Civil Rights](https:\/\/www.irs.gov\/about-irs\/protecting-taxpayer-civil-rights)\n  - [FOIA](https:\/\/www.irs.gov\/privacy-disclosure\/irs-freedom-of-information)\n  - [No FEAR Act Data](https:\/\/home.treasury.gov\/footer\/no-fear-act)\n  - [Reliance on Guidance](https:\/\/www.irs.gov\/newsroom\/general-overview-of-taxpayer-reliance-on-guidance-published-in-the-internal-revenue-bulletin-and-faqs)\n- Resolve an Issue\n  - [IRS Notices and Letters](https:\/\/www.irs.gov\/individuals\/understanding-your-irs-notice-or-letter)\n  - [Identity Theft](https:\/\/www.irs.gov\/identity-theft-central)\n  - [Tax scams](https:\/\/www.irs.gov\/help\/tax-scams)\n  - [Tax Fraud](https:\/\/www.irs.gov\/compliance\/criminal-investigation\/tax-fraud-alerts)\n  - [Criminal Investigation](https:\/\/www.irs.gov\/compliance\/criminal-investigation)\n  - [Whistleblower Office](https:\/\/www.irs.gov\/compliance\/whistleblower-office)\n- Languages\n  - [Español](https:\/\/www.irs.gov\/es)\n  - [中文 (简体)](https:\/\/www.irs.gov\/zh-hans)\n  - [中文 (繁體)](https:\/\/www.irs.gov\/zh-hant)\n  - [한국어](https:\/\/www.irs.gov\/ko)\n  - [Pусский](https:\/\/www.irs.gov\/ru)\n  - [Tiếng Việt](https:\/\/www.irs.gov\/vi)\n  - [Kreyòl ayisyen](https:\/\/www.irs.gov\/ht)\n  - [English](https:\/\/www.irs.gov\/)\n- Related Sites\n  - [U.S. Treasury](https:\/\/www.treasury.gov\/)\n  - [Treasury Inspector General for Tax Administration](https:\/\/www.treasury.gov\/tigta\/)\n  - [USA.gov](https:\/\/www.usa.gov\/)\n  - [USAspending.gov](https:\/\/www.usaspending.gov\/)\n  - [Vote.gov](https:\/\/vote.gov\/)\n\n[![Home](https:\/\/www.irs.gov\/themes\/custom\/pup_base\/IRS-Logo.svg)](https:\/\/www.irs.gov\/)\n\n## Subfooter\n- [Privacy Policy](https:\/\/www.irs.gov\/privacy-disclosure\/irs-privacy-policy)\n- [Accessibility](https:\/\/www.irs.gov\/accessibility)\n\n✓\n\nThanks for sharing\\!\n\n[AddToAny](https:\/\/www.addtoany.com\/ \"Share Buttons\")\n\n[More…](https:\/\/www.irs.gov\/retirement-plans\/operating-a-401k-plan#addtoany \"Show all\")","attrs_readable_markdown":"Once you have established a 401(k) plan, you assume certain responsibilities in operating the plan. If you hired someone to help in setting up your plan, that arrangement also may have included help in operating the plan. If not, another important decision will be whether to manage the plan yourself or to hire a professional or financial institution - such as a bank, mutual fund provider, or insurance company - to take care of some or most aspects of operating the plan. Elements of a plan that need to be handled include:\n\n- [Participation](https:\/\/www.irs.gov\/retirement-plans\/operating-a-401k-plan#participation)\n- [Contributions](https:\/\/www.irs.gov\/retirement-plans\/operating-a-401k-plan#contributions)\n- [Vesting](https:\/\/www.irs.gov\/retirement-plans\/operating-a-401k-plan#vesting)\n- [Nondiscrimination](https:\/\/www.irs.gov\/retirement-plans\/operating-a-401k-plan#nondiscrimination)\n- [Investing 401(k) monies](https:\/\/www.irs.gov\/retirement-plans\/operating-a-401k-plan#investing)\n- [Fiduciary responsibilities](https:\/\/www.irs.gov\/retirement-plans\/retirement-plan-fiduciary-responsibilities \"Retirement plan fiduciary responsibilities\")\n- [Disclosing plan information to participants](https:\/\/www.irs.gov\/retirement-plans\/operating-a-401k-plan#disclosing)\n- [Reporting to government agencies](https:\/\/www.irs.gov\/retirement-plans\/operating-a-401k-plan#reporting)\n- [Distributing plan benefits](https:\/\/www.irs.gov\/retirement-plans\/operating-a-401k-plan#distributing)\n- [Compliance](https:\/\/www.irs.gov\/retirement-plans\/operating-a-401k-plan#compliance)\n***\n## Participation\nTypically, a plan includes a mix of rank-and-file employees and owner\/managers. However, some employees may be excluded from a 401(k) plan if they:\n\n- Have not attained age 21;\n- Have not completed a year of service; or\n- Are covered by a collective bargaining agreement that does not provide for participation in the plan, if retirement benefits were the subject of good faith bargaining.\n\nEmployees cannot be excluded from a plan merely because they are older workers.\n***\n## Contributions\nAnother design option you will have in establishing and operating a 401(k) plan is deciding on your business’s contribution (if any) to participants’ accounts in the plan.\n\n### Traditional 401(k) plan\nIf you decide to contribute to your 401(k) plan, you have further options. You can contribute a percentage of each employee’s compensation to the employee’s account (called a nonelective contribution), you can match the amount your employees decide to contribute (within the limits of current law) or you can do both.\n\nFor example, you may decide to add a percentage- say 50 percent- to an employee’s contribution, which results in a 50-cent increase for every dollar the employee sets aside. Using a matching contribution formula will provide additional employer contributions only to employees who make deferrals to the 401(k) plan. If you choose to make nonelective contributions, the employer makes a contribution for each eligible participant, whether or not the participant decides to make a salary deferral to his or her 401(k) account.\n\nUnder a traditional 401(k) plan, you have the flexibility of changing the amount of nonelective contributions each year, according to business conditions.\n\n### Safe harbor 401(k) plan\nUnder a safe harbor plan, you can match each eligible employee’s contribution, dollar-for-dollar, up to 3 percent of the employee’s compensation, and 50 cents on the dollar for the employee’s contribution that exceeds 3 percent, but not 5 percent, of the employee’s compensation. Alternatively, you can make a nonelective contribution equal to 3 percent of compensation to each eligible employee’s account. Each year you must make either the matching contributions or the nonelective contributions.\n\n### Automatic enrollment 401(k)\nUnder an automatic enrollment 401(k) plan with a qualified automatic contribution arrangement, the plan is exempt from the annual IRS testing requirement that a traditional 401(k) plan must perform. The initial automatic employee contribution must be at least 3 percent of compensation. Contributions may have to automatically increase so that, by the fifth year, the automatic employee contribution is at least 6 percent of compensation.\n\nThe automatic employee contributions cannot exceed 10 percent of compensation in any year. The employee is permitted to change the amount of his or her employee contributions or choose not to contribute but must do so by making an affirmative election.\n\nThe employer must make at least either:\n\n- A matching contribution of 100 percent for salary deferrals up to 1 percent of compensation and a 50 percent match for all salary deferrals above 1 percent but no more than 6 percent of compensation; or\n- A nonelective contribution of 3 percent of compensation to all participants\n### SIMPLE 401(k) plan\nEmployer contributions to a SIMPLE 401(k) plan are limited to either:\n\n1. A dollar-for-dollar matching contribution, up to 3 percent of pay; or\n2. A nonelective contribution of 2 percent of pay for each eligible employee.\n\nNo other employer contributions can be made to a SIMPLE 401(k) plan, and employees cannot participate in any other retirement plan of the employer.\n\nThe maximum amount that employees can contribute to their SIMPLE 401(k) accounts is \\$16,000 in 2024 (\\$15,500 in 2023, \\$14,000 in 2022, \\$13,500 in 2021 and in 2020 and \\$13,000 in 2019). See [annual cost-of-living updates](https:\/\/www.irs.gov\/retirement-plans\/cola-increases-for-dollar-limitations-on-benefits-and-contributions \"COLA increases for dollar limitations on benefits and contributions\") for more information.\n\nAn additional catch-up contribution is allowed for employees aged 50 and over. The additional contribution amount is \\$3,500 in 2023 and 2024 (\\$3,000 in 2022, 2021, 2020 and 2019).\n\n### Contribution limits\nTotal employer and employee contributions to all of an employer’s plans are subject to an overall annual limitation - the lesser of:\n\n- 100 percent of the employee’s compensation, or\n- \\$69,000 for 2024 (\\$66,000 for 2023; \\$61,000 for 2022; \\$58,000 for 2021; \\$57,000 for 2020; \\$56,000 for 2019).\n\nThe amount employees can contribute under a traditional, safe harbor or automatic enrollment 401(k) plan is limited to \\$23,000 in 2024 (\\$22,500 in 2023, \\$20,500 in 2022, \\$19,500 in 2021 and in 2020 and \\$19,000 in 2019).\n\nTraditional, safe harbor and automatic enrollment 401(k) plans can allow additional catch-up contributions in the amount of \\$7,500 in 2023 and 2024, \\$6,500 in 2022, 2021 and in 2020 and \\$6,000 in 2019 for employees aged 50 and over.\n***\n## Vesting\nEmployee salary deferrals are immediately 100 percent vested- that is, the money that an employee has put aside through salary deferrals cannot be forfeited. When an employee leaves employment, he\/she is entitled to those deferrals, plus any investment gains (or minus losses) on their deferrals.\n\nIn SIMPLE 401(k) plans and safe harbor 401(k) plans, all required employer contributions are always 100 percent vested.\n\nIn traditional 401(k) plans, you can design your plan so that employer contributions become vested over time, according to a vesting schedule.\n***\n## Nondiscrimination\nRealizing 401(k) plan tax benefits requires that plans provide substantive benefits for rank-and-file employees, not only for business owners and managers. These requirements are referred to as nondiscrimination rules and cover the level of plan benefits for rank-and-file employees compared to owners\/managers.\n\nTraditional 401(k) plans are subject to annual testing to ensure that the amount of contributions made on behalf of rank-and-file employees is proportional to contributions made on behalf of owners and managers. Safe harbor 401(k) plans and SIMPLE 401(k) plans are not subject to annual nondiscrimination testing.\n***\n## Investing 401(k) monies\nAfter you decide on the type of 401(k) plan, you can consider the variety of investment options. One decision you will need to make in designing a plan is whether to permit your employees to direct the investment of their accounts or to manage the monies on their behalf. If you choose the former, you also need to decide what investment options to make available to the participants. Depending on the plan design you choose, you may want to hire someone either to determine the investment options to make available or to manage the plan’s investments. Continually monitoring the investment options ensures that your selections remain in the best interests of your plan and its participants.\n***\n## Disclosing plan information to participants\nPlan disclosure documents keep participants informed about the basics of plan operation, alert them to changes in the plan’s structure and operations, and provide them a chance to make decisions and take timely action with respect to their accounts.\n\nThe **summary plan description (SPD)**\\- the basic descriptive document - is a plain-language explanation of the plan and must be comprehensive enough to apprise participants of their rights and responsibilities under the plan. It also informs participants about the plan features and what to expect of the plan. Among other things, the SPD must include information about:\n\n- When and how employees become eligible to participate in the 401(k) plan;\n- The contributions to the plan;\n- How long it takes to become vested;\n- When employees are eligible to receive their benefits;\n- How to file a claim for those benefits; and\n- Basic rights and responsibilities participants have under the Federal retirement law, the Employee Retirement Income Security Act (ERISA).\n\nThe SPD should include an explanation about the administrative expenses that will be paid by the plan. This document must be given to participants when they join the plan and to beneficiaries when they first receive benefits. SPDs must also be redistributed periodically during the life of the plan.\n\nA **summary of material modification (SMM)** apprises participants of changes made to the plan or to the information required to be in the SPD. The SMM or an updated SPD must be automatically furnished to participants within a specified number of days after the change.\n\nAn **individual benefit statement (IBS)** shows the total plan benefits earned by a participant, vested benefits, the value of each investment in the account, information describing the ability to direct investments, and (for plans with participant-direction) an explanation of the importance of a diversified portfolio. Plans that provide for participant directed accounts must furnish individual account statements on a quarterly basis. Plans that do not provide for participant direction must furnish statements annually.\n\nA **summary annual report (SAR)** is a narrative of the plan’s annual return\/report, the Form 5500, filed with the Federal government (see *Reporting to Government Agencies* for more information). It must be furnished annually to participants.\n\nA **blackout period notice** gives employees advance notice when a blackout period occurs, typically when plans change recordkeepers or investment options, or when plans add participants due to corporate mergers or acquisitions. During a blackout period, participants’ rights to direct investments, take loans, or obtain distributions are suspended.\n***\n## Reporting to government agencies\nIn addition to the disclosure documents that provide information to participants, plans must also report certain information to government entities.\n\n### Form 5500 series\nPlans are required to file an annual return\/report with the Federal government. Depending on the number and type of participants covered, most401(k) plans must file one of the two following forms:\n\n[Form 5500, Annual Return\/Report of Employee Benefit Plan](https:\/\/www.dol.gov\/agencies\/ebsa\/employers-and-advisers\/plan-administration-and-compliance\/reporting-and-filing\/forms \"Form 5500, Annual Return\/Report of Employee Benefit Plan\"), or  \n [Form 5500-EZ, Annual Return of One-Participant (Owners and Spouses) Retirement Plan PDF](https:\/\/www.irs.gov\/pub\/irs-pdf\/f5500ez.pdf \"2025 Form 5500-EZ                        (PDF)\")\n\nFor 401(k) plans, the Form 5500 is designed to disclose information about the plan and its operation to the IRS, the U.S. Department of Labor, plan participants, and the public.\n\nMost one-participant plans (sole proprietor and partnership plans) with total assets of \\$250,000 or less are exempt from the annual filing requirement. A final return\/report must be filed when a plan is terminated regardless of the value of the plan’s assets.\n\n### Form 1099-R\n[Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. PDF](https:\/\/www.irs.gov\/pub\/irs-pdf\/f1099r.pdf \"2025 Form 1099-R                         (PDF)\")is given to both the IRS and recipients of distributions from the plan during the year. It is used to report distributions (including rollovers) from a retirement plan.\n***\n## Distributing plan benefits\nBenefits in a 401(k) plan are dependent on a participant’s account balance at the time of distribution.\n\nWhen participants are eligible to receive a distribution, they typically can elect to:\n\n- Take a lump sum distribution of their account,\n- Roll over their account to an IRA or another employer’s retirement plan, or\n- Purchase an annuity.\n***\n## Compliance\nEven with the best intentions, mistakes in plan operation can still happen. The U.S. Department of Labor and IRS have correction programs to help 401(k) plan sponsors [correct plan errors](https:\/\/www.irs.gov\/retirement-plans\/401k-plan-fix-it-guide \"401(k) plan fix-it guide\"), protect participants, and keep plan's tax benefits. These programs are structured to encourage you to correct the errors early. Having an ongoing review program makes it easier to spot and correct mistakes in plan operations.\n\n[Back to top](https:\/\/www.irs.gov\/retirement-plans\/operating-a-401k-plan#top)","meta_canonical":null}

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URL	https://www.irs.gov/retirement-plans/operating-a-401k-plan
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Meta Title	Operating a 401(k) plan \| Internal Revenue Service
Meta Description	Plan operational elements that need to be handled by employers who have established 401(k) plans.
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Boilerpipe Text	Once you have established a 401(k) plan, you assume certain responsibilities in operating the plan. If you hired someone to help in setting up your plan, that arrangement also may have included help in operating the plan. If not, another important decision will be whether to manage the plan yourself or to hire a professional or financial institution - such as a bank, mutual fund provider, or insurance company - to take care of some or most aspects of operating the plan. Elements of a plan that need to be handled include: Participation Contributions Vesting Nondiscrimination Investing 401(k) monies Fiduciary responsibilities Disclosing plan information to participants Reporting to government agencies Distributing plan benefits Compliance Participation Typically, a plan includes a mix of rank-and-file employees and owner/managers. However, some employees may be excluded from a 401(k) plan if they: Have not attained age 21; Have not completed a year of service; or Are covered by a collective bargaining agreement that does not provide for participation in the plan, if retirement benefits were the subject of good faith bargaining. Employees cannot be excluded from a plan merely because they are older workers. Contributions Another design option you will have in establishing and operating a 401(k) plan is deciding on your business’s contribution (if any) to participants’ accounts in the plan. Traditional 401(k) plan If you decide to contribute to your 401(k) plan, you have further options. You can contribute a percentage of each employee’s compensation to the employee’s account (called a nonelective contribution), you can match the amount your employees decide to contribute (within the limits of current law) or you can do both. For example, you may decide to add a percentage- say 50 percent- to an employee’s contribution, which results in a 50-cent increase for every dollar the employee sets aside. Using a matching contribution formula will provide additional employer contributions only to employees who make deferrals to the 401(k) plan. If you choose to make nonelective contributions, the employer makes a contribution for each eligible participant, whether or not the participant decides to make a salary deferral to his or her 401(k) account. Under a traditional 401(k) plan, you have the flexibility of changing the amount of nonelective contributions each year, according to business conditions. Safe harbor 401(k) plan Under a safe harbor plan, you can match each eligible employee’s contribution, dollar-for-dollar, up to 3 percent of the employee’s compensation, and 50 cents on the dollar for the employee’s contribution that exceeds 3 percent, but not 5 percent, of the employee’s compensation. Alternatively, you can make a nonelective contribution equal to 3 percent of compensation to each eligible employee’s account. Each year you must make either the matching contributions or the nonelective contributions. Automatic enrollment 401(k) Under an automatic enrollment 401(k) plan with a qualified automatic contribution arrangement, the plan is exempt from the annual IRS testing requirement that a traditional 401(k) plan must perform. The initial automatic employee contribution must be at least 3 percent of compensation. Contributions may have to automatically increase so that, by the fifth year, the automatic employee contribution is at least 6 percent of compensation. The automatic employee contributions cannot exceed 10 percent of compensation in any year. The employee is permitted to change the amount of his or her employee contributions or choose not to contribute but must do so by making an affirmative election. The employer must make at least either: A matching contribution of 100 percent for salary deferrals up to 1 percent of compensation and a 50 percent match for all salary deferrals above 1 percent but no more than 6 percent of compensation; or A nonelective contribution of 3 percent of compensation to all participants SIMPLE 401(k) plan Employer contributions to a SIMPLE 401(k) plan are limited to either: A dollar-for-dollar matching contribution, up to 3 percent of pay; or A nonelective contribution of 2 percent of pay for each eligible employee. No other employer contributions can be made to a SIMPLE 401(k) plan, and employees cannot participate in any other retirement plan of the employer. The maximum amount that employees can contribute to their SIMPLE 401(k) accounts is $16,000 in 2024 ($15,500 in 2023, $14,000 in 2022, $13,500 in 2021 and in 2020 and $13,000 in 2019). See annual cost-of-living updates for more information. An additional catch-up contribution is allowed for employees aged 50 and over. The additional contribution amount is $3,500 in 2023 and 2024 ($3,000 in 2022, 2021, 2020 and 2019). Contribution limits Total employer and employee contributions to all of an employer’s plans are subject to an overall annual limitation - the lesser of: 100 percent of the employee’s compensation, or $69,000 for 2024 ($66,000 for 2023; $61,000 for 2022; $58,000 for 2021; $57,000 for 2020; $56,000 for 2019). The amount employees can contribute under a traditional, safe harbor or automatic enrollment 401(k) plan is limited to $23,000 in 2024 ($22,500 in 2023, $20,500 in 2022, $19,500 in 2021 and in 2020 and $19,000 in 2019). Traditional, safe harbor and automatic enrollment 401(k) plans can allow additional catch-up contributions in the amount of $7,500 in 2023 and 2024, $6,500 in 2022, 2021 and in 2020 and $6,000 in 2019 for employees aged 50 and over. Vesting Employee salary deferrals are immediately 100 percent vested- that is, the money that an employee has put aside through salary deferrals cannot be forfeited. When an employee leaves employment, he/she is entitled to those deferrals, plus any investment gains (or minus losses) on their deferrals. In SIMPLE 401(k) plans and safe harbor 401(k) plans, all required employer contributions are always 100 percent vested. In traditional 401(k) plans, you can design your plan so that employer contributions become vested over time, according to a vesting schedule. Nondiscrimination Realizing 401(k) plan tax benefits requires that plans provide substantive benefits for rank-and-file employees, not only for business owners and managers. These requirements are referred to as nondiscrimination rules and cover the level of plan benefits for rank-and-file employees compared to owners/managers. Traditional 401(k) plans are subject to annual testing to ensure that the amount of contributions made on behalf of rank-and-file employees is proportional to contributions made on behalf of owners and managers. Safe harbor 401(k) plans and SIMPLE 401(k) plans are not subject to annual nondiscrimination testing. Investing 401(k) monies After you decide on the type of 401(k) plan, you can consider the variety of investment options. One decision you will need to make in designing a plan is whether to permit your employees to direct the investment of their accounts or to manage the monies on their behalf. If you choose the former, you also need to decide what investment options to make available to the participants. Depending on the plan design you choose, you may want to hire someone either to determine the investment options to make available or to manage the plan’s investments. Continually monitoring the investment options ensures that your selections remain in the best interests of your plan and its participants. Disclosing plan information to participants Plan disclosure documents keep participants informed about the basics of plan operation, alert them to changes in the plan’s structure and operations, and provide them a chance to make decisions and take timely action with respect to their accounts. The summary plan description (SPD) - the basic descriptive document - is a plain-language explanation of the plan and must be comprehensive enough to apprise participants of their rights and responsibilities under the plan. It also informs participants about the plan features and what to expect of the plan. Among other things, the SPD must include information about: When and how employees become eligible to participate in the 401(k) plan; The contributions to the plan; How long it takes to become vested; When employees are eligible to receive their benefits; How to file a claim for those benefits; and Basic rights and responsibilities participants have under the Federal retirement law, the Employee Retirement Income Security Act (ERISA). The SPD should include an explanation about the administrative expenses that will be paid by the plan. This document must be given to participants when they join the plan and to beneficiaries when they first receive benefits. SPDs must also be redistributed periodically during the life of the plan. A summary of material modification (SMM) apprises participants of changes made to the plan or to the information required to be in the SPD. The SMM or an updated SPD must be automatically furnished to participants within a specified number of days after the change. An individual benefit statement (IBS) shows the total plan benefits earned by a participant, vested benefits, the value of each investment in the account, information describing the ability to direct investments, and (for plans with participant-direction) an explanation of the importance of a diversified portfolio. Plans that provide for participant directed accounts must furnish individual account statements on a quarterly basis. Plans that do not provide for participant direction must furnish statements annually. A summary annual report (SAR) is a narrative of the plan’s annual return/report, the Form 5500, filed with the Federal government (see Reporting to Government Agencies for more information). It must be furnished annually to participants. A blackout period notice gives employees advance notice when a blackout period occurs, typically when plans change recordkeepers or investment options, or when plans add participants due to corporate mergers or acquisitions. During a blackout period, participants’ rights to direct investments, take loans, or obtain distributions are suspended. Reporting to government agencies In addition to the disclosure documents that provide information to participants, plans must also report certain information to government entities. Form 5500 series Plans are required to file an annual return/report with the Federal government. Depending on the number and type of participants covered, most401(k) plans must file one of the two following forms: Form 5500, Annual Return/Report of Employee Benefit Plan , or Form 5500-EZ, Annual Return of One-Participant (Owners and Spouses) Retirement Plan PDF For 401(k) plans, the Form 5500 is designed to disclose information about the plan and its operation to the IRS, the U.S. Department of Labor, plan participants, and the public. Most one-participant plans (sole proprietor and partnership plans) with total assets of $250,000 or less are exempt from the annual filing requirement. A final return/report must be filed when a plan is terminated regardless of the value of the plan’s assets. Form 1099-R Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. PDF is given to both the IRS and recipients of distributions from the plan during the year. It is used to report distributions (including rollovers) from a retirement plan. Distributing plan benefits Benefits in a 401(k) plan are dependent on a participant’s account balance at the time of distribution. When participants are eligible to receive a distribution, they typically can elect to: Take a lump sum distribution of their account, Roll over their account to an IRA or another employer’s retirement plan, or Purchase an annuity. Compliance Even with the best intentions, mistakes in plan operation can still happen. The U.S. Department of Labor and IRS have correction programs to help 401(k) plan sponsors correct plan errors , protect participants, and keep plan's tax benefits. These programs are structured to encourage you to correct the errors early. Having an ongoing review program makes it easier to spot and correct mistakes in plan operations. Back to top
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Operating a 401(k) plan # Operating a 401(k) plan ### More In Retirement Plans - [IRAs](https://www.irs.gov/retirement-plans/individual-retirement-arrangements-iras "IRAs") - [Types of retirement plans](https://www.irs.gov/retirement-plans/plan-sponsor/types-of-retirement-plans "Types of retirement plans") - [Required minimum distributions](https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds "Required minimum distributions") - [Published guidance](https://www.irs.gov/retirement-plans/published-guidance "Published guidance") - [Forms and publications](https://www.irs.gov/retirement-plans/retirement-plan-forms-and-publications "Forms and publications") - [Operate a retirement plan](https://www.irs.gov/retirement-plans/operate-a-retirement-plan "Operate a retirement plan") - [News](https://www.irs.gov/retirement-plans/newsletters "News") - [Topic index](https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics "Topic index") Once you have established a 401(k) plan, you assume certain responsibilities in operating the plan. If you hired someone to help in setting up your plan, that arrangement also may have included help in operating the plan. If not, another important decision will be whether to manage the plan yourself or to hire a professional or financial institution - such as a bank, mutual fund provider, or insurance company - to take care of some or most aspects of operating the plan. Elements of a plan that need to be handled include: - [Participation](https://www.irs.gov/retirement-plans/operating-a-401k-plan#participation) - [Contributions](https://www.irs.gov/retirement-plans/operating-a-401k-plan#contributions) - [Vesting](https://www.irs.gov/retirement-plans/operating-a-401k-plan#vesting) - [Nondiscrimination](https://www.irs.gov/retirement-plans/operating-a-401k-plan#nondiscrimination) - [Investing 401(k) monies](https://www.irs.gov/retirement-plans/operating-a-401k-plan#investing) - [Fiduciary responsibilities](https://www.irs.gov/retirement-plans/retirement-plan-fiduciary-responsibilities "Retirement plan fiduciary responsibilities") - [Disclosing plan information to participants](https://www.irs.gov/retirement-plans/operating-a-401k-plan#disclosing) - [Reporting to government agencies](https://www.irs.gov/retirement-plans/operating-a-401k-plan#reporting) - [Distributing plan benefits](https://www.irs.gov/retirement-plans/operating-a-401k-plan#distributing) - [Compliance](https://www.irs.gov/retirement-plans/operating-a-401k-plan#compliance) * ## Participation Typically, a plan includes a mix of rank-and-file employees and owner/managers. However, some employees may be excluded from a 401(k) plan if they: - Have not attained age 21; - Have not completed a year of service; or - Are covered by a collective bargaining agreement that does not provide for participation in the plan, if retirement benefits were the subject of good faith bargaining. Employees cannot be excluded from a plan merely because they are older workers. * ## Contributions Another design option you will have in establishing and operating a 401(k) plan is deciding on your business’s contribution (if any) to participants’ accounts in the plan. ### Traditional 401(k) plan If you decide to contribute to your 401(k) plan, you have further options. You can contribute a percentage of each employee’s compensation to the employee’s account (called a nonelective contribution), you can match the amount your employees decide to contribute (within the limits of current law) or you can do both. For example, you may decide to add a percentage- say 50 percent- to an employee’s contribution, which results in a 50-cent increase for every dollar the employee sets aside. Using a matching contribution formula will provide additional employer contributions only to employees who make deferrals to the 401(k) plan. If you choose to make nonelective contributions, the employer makes a contribution for each eligible participant, whether or not the participant decides to make a salary deferral to his or her 401(k) account. Under a traditional 401(k) plan, you have the flexibility of changing the amount of nonelective contributions each year, according to business conditions. ### Safe harbor 401(k) plan Under a safe harbor plan, you can match each eligible employee’s contribution, dollar-for-dollar, up to 3 percent of the employee’s compensation, and 50 cents on the dollar for the employee’s contribution that exceeds 3 percent, but not 5 percent, of the employee’s compensation. Alternatively, you can make a nonelective contribution equal to 3 percent of compensation to each eligible employee’s account. Each year you must make either the matching contributions or the nonelective contributions. ### Automatic enrollment 401(k) Under an automatic enrollment 401(k) plan with a qualified automatic contribution arrangement, the plan is exempt from the annual IRS testing requirement that a traditional 401(k) plan must perform. The initial automatic employee contribution must be at least 3 percent of compensation. Contributions may have to automatically increase so that, by the fifth year, the automatic employee contribution is at least 6 percent of compensation. The automatic employee contributions cannot exceed 10 percent of compensation in any year. The employee is permitted to change the amount of his or her employee contributions or choose not to contribute but must do so by making an affirmative election. The employer must make at least either: - A matching contribution of 100 percent for salary deferrals up to 1 percent of compensation and a 50 percent match for all salary deferrals above 1 percent but no more than 6 percent of compensation; or - A nonelective contribution of 3 percent of compensation to all participants ### SIMPLE 401(k) plan Employer contributions to a SIMPLE 401(k) plan are limited to either: 1. A dollar-for-dollar matching contribution, up to 3 percent of pay; or 2. A nonelective contribution of 2 percent of pay for each eligible employee. No other employer contributions can be made to a SIMPLE 401(k) plan, and employees cannot participate in any other retirement plan of the employer. The maximum amount that employees can contribute to their SIMPLE 401(k) accounts is \$16,000 in 2024 (\$15,500 in 2023, \$14,000 in 2022, \$13,500 in 2021 and in 2020 and \$13,000 in 2019). See [annual cost-of-living updates](https://www.irs.gov/retirement-plans/cola-increases-for-dollar-limitations-on-benefits-and-contributions "COLA increases for dollar limitations on benefits and contributions") for more information. An additional catch-up contribution is allowed for employees aged 50 and over. The additional contribution amount is \$3,500 in 2023 and 2024 (\$3,000 in 2022, 2021, 2020 and 2019). ### Contribution limits Total employer and employee contributions to all of an employer’s plans are subject to an overall annual limitation - the lesser of: - 100 percent of the employee’s compensation, or - \$69,000 for 2024 (\$66,000 for 2023; \$61,000 for 2022; \$58,000 for 2021; \$57,000 for 2020; \$56,000 for 2019). The amount employees can contribute under a traditional, safe harbor or automatic enrollment 401(k) plan is limited to \$23,000 in 2024 (\$22,500 in 2023, \$20,500 in 2022, \$19,500 in 2021 and in 2020 and \$19,000 in 2019). Traditional, safe harbor and automatic enrollment 401(k) plans can allow additional catch-up contributions in the amount of \$7,500 in 2023 and 2024, \$6,500 in 2022, 2021 and in 2020 and \$6,000 in 2019 for employees aged 50 and over. * ## Vesting Employee salary deferrals are immediately 100 percent vested- that is, the money that an employee has put aside through salary deferrals cannot be forfeited. When an employee leaves employment, he/she is entitled to those deferrals, plus any investment gains (or minus losses) on their deferrals. In SIMPLE 401(k) plans and safe harbor 401(k) plans, all required employer contributions are always 100 percent vested. In traditional 401(k) plans, you can design your plan so that employer contributions become vested over time, according to a vesting schedule. * ## Nondiscrimination Realizing 401(k) plan tax benefits requires that plans provide substantive benefits for rank-and-file employees, not only for business owners and managers. These requirements are referred to as nondiscrimination rules and cover the level of plan benefits for rank-and-file employees compared to owners/managers. Traditional 401(k) plans are subject to annual testing to ensure that the amount of contributions made on behalf of rank-and-file employees is proportional to contributions made on behalf of owners and managers. Safe harbor 401(k) plans and SIMPLE 401(k) plans are not subject to annual nondiscrimination testing. * ## Investing 401(k) monies After you decide on the type of 401(k) plan, you can consider the variety of investment options. One decision you will need to make in designing a plan is whether to permit your employees to direct the investment of their accounts or to manage the monies on their behalf. If you choose the former, you also need to decide what investment options to make available to the participants. Depending on the plan design you choose, you may want to hire someone either to determine the investment options to make available or to manage the plan’s investments. Continually monitoring the investment options ensures that your selections remain in the best interests of your plan and its participants. * ## Disclosing plan information to participants Plan disclosure documents keep participants informed about the basics of plan operation, alert them to changes in the plan’s structure and operations, and provide them a chance to make decisions and take timely action with respect to their accounts. The summary plan description (SPD)\- the basic descriptive document - is a plain-language explanation of the plan and must be comprehensive enough to apprise participants of their rights and responsibilities under the plan. It also informs participants about the plan features and what to expect of the plan. Among other things, the SPD must include information about: - When and how employees become eligible to participate in the 401(k) plan; - The contributions to the plan; - How long it takes to become vested; - When employees are eligible to receive their benefits; - How to file a claim for those benefits; and - Basic rights and responsibilities participants have under the Federal retirement law, the Employee Retirement Income Security Act (ERISA). The SPD should include an explanation about the administrative expenses that will be paid by the plan. This document must be given to participants when they join the plan and to beneficiaries when they first receive benefits. SPDs must also be redistributed periodically during the life of the plan. A summary of material modification (SMM) apprises participants of changes made to the plan or to the information required to be in the SPD. The SMM or an updated SPD must be automatically furnished to participants within a specified number of days after the change. An individual benefit statement (IBS) shows the total plan benefits earned by a participant, vested benefits, the value of each investment in the account, information describing the ability to direct investments, and (for plans with participant-direction) an explanation of the importance of a diversified portfolio. Plans that provide for participant directed accounts must furnish individual account statements on a quarterly basis. Plans that do not provide for participant direction must furnish statements annually. A summary annual report (SAR) is a narrative of the plan’s annual return/report, the Form 5500, filed with the Federal government (see Reporting to Government Agencies for more information). It must be furnished annually to participants. A blackout period notice gives employees advance notice when a blackout period occurs, typically when plans change recordkeepers or investment options, or when plans add participants due to corporate mergers or acquisitions. During a blackout period, participants’ rights to direct investments, take loans, or obtain distributions are suspended. * ## Reporting to government agencies In addition to the disclosure documents that provide information to participants, plans must also report certain information to government entities. ### Form 5500 series Plans are required to file an annual return/report with the Federal government. Depending on the number and type of participants covered, most401(k) plans must file one of the two following forms: [Form 5500, Annual Return/Report of Employee Benefit Plan](https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/forms "Form 5500, Annual Return/Report of Employee Benefit Plan"), or [Form 5500-EZ, Annual Return of One-Participant (Owners and Spouses) Retirement Plan PDF](https://www.irs.gov/pub/irs-pdf/f5500ez.pdf "2025 Form 5500-EZ (PDF)") For 401(k) plans, the Form 5500 is designed to disclose information about the plan and its operation to the IRS, the U.S. Department of Labor, plan participants, and the public. Most one-participant plans (sole proprietor and partnership plans) with total assets of \$250,000 or less are exempt from the annual filing requirement. A final return/report must be filed when a plan is terminated regardless of the value of the plan’s assets. ### Form 1099-R [Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. PDF](https://www.irs.gov/pub/irs-pdf/f1099r.pdf "2025 Form 1099-R (PDF)")is given to both the IRS and recipients of distributions from the plan during the year. It is used to report distributions (including rollovers) from a retirement plan. * ## Distributing plan benefits Benefits in a 401(k) plan are dependent on a participant’s account balance at the time of distribution. When participants are eligible to receive a distribution, they typically can elect to: - Take a lump sum distribution of their account, - Roll over their account to an IRA or another employer’s retirement plan, or - Purchase an annuity. *** ## Compliance Even with the best intentions, mistakes in plan operation can still happen. The U.S. Department of Labor and IRS have correction programs to help 401(k) plan sponsors [correct plan errors](https://www.irs.gov/retirement-plans/401k-plan-fix-it-guide "401(k) plan fix-it guide"), protect participants, and keep plan's tax benefits. These programs are structured to encourage you to correct the errors early. Having an ongoing review program makes it easier to spot and correct mistakes in plan operations. [Back to top](https://www.irs.gov/retirement-plans/operating-a-401k-plan#top) Page Last Reviewed or Updated: 26-Aug-2025 - [Share](https://www.irs.gov/retirement-plans/operating-a-401k-plan) - [Facebook](https://www.irs.gov/#facebook) - [Twitter](https://www.irs.gov/#twitter) - [Linkedin](https://www.irs.gov/#linkedin) - Print ## Footer Navigation - Our Agency - [About IRS](https://www.irs.gov/about-irs) - [Careers](https://jobs.irs.gov/) - [Operations and Budget](https://www.irs.gov/statistics/soi-tax-stats-irs-operations-and-budget) - [Tax Statistics](https://www.irs.gov/statistics) - [Help](https://www.irs.gov/help/let-us-help-you) - [Find a Local Office](https://www.irs.gov/help/contact-your-local-irs-office) - Know Your Rights - [Taxpayer Bill of Rights](https://www.irs.gov/taxpayer-bill-of-rights) - [Taxpayer Advocate Service](https://www.irs.gov/taxpayer-advocate) - [Independent Office of Appeals](https://www.irs.gov/appeals) - [Civil Rights](https://www.irs.gov/about-irs/protecting-taxpayer-civil-rights) - [FOIA](https://www.irs.gov/privacy-disclosure/irs-freedom-of-information) - [No FEAR Act Data](https://home.treasury.gov/footer/no-fear-act) - [Reliance on Guidance](https://www.irs.gov/newsroom/general-overview-of-taxpayer-reliance-on-guidance-published-in-the-internal-revenue-bulletin-and-faqs) - Resolve an Issue - [IRS Notices and Letters](https://www.irs.gov/individuals/understanding-your-irs-notice-or-letter) - [Identity Theft](https://www.irs.gov/identity-theft-central) - [Tax scams](https://www.irs.gov/help/tax-scams) - [Tax Fraud](https://www.irs.gov/compliance/criminal-investigation/tax-fraud-alerts) - [Criminal Investigation](https://www.irs.gov/compliance/criminal-investigation) - [Whistleblower Office](https://www.irs.gov/compliance/whistleblower-office) - Languages - [Español](https://www.irs.gov/es) - [中文 (简体)](https://www.irs.gov/zh-hans) - [中文 (繁體)](https://www.irs.gov/zh-hant) - [한국어](https://www.irs.gov/ko) - [Pусский](https://www.irs.gov/ru) - [Tiếng Việt](https://www.irs.gov/vi) - [Kreyòl ayisyen](https://www.irs.gov/ht) - [English](https://www.irs.gov/) - Related Sites - [U.S. Treasury](https://www.treasury.gov/) - [Treasury Inspector General for Tax Administration](https://www.treasury.gov/tigta/) - [USA.gov](https://www.usa.gov/) - [USAspending.gov](https://www.usaspending.gov/) - [Vote.gov](https://vote.gov/) [![Home](https://www.irs.gov/themes/custom/pup_base/IRS-Logo.svg)](https://www.irs.gov/) ## Subfooter - [Privacy Policy](https://www.irs.gov/privacy-disclosure/irs-privacy-policy) - [Accessibility](https://www.irs.gov/accessibility) ✓ Thanks for sharing\! 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Readable Markdown	Once you have established a 401(k) plan, you assume certain responsibilities in operating the plan. If you hired someone to help in setting up your plan, that arrangement also may have included help in operating the plan. If not, another important decision will be whether to manage the plan yourself or to hire a professional or financial institution - such as a bank, mutual fund provider, or insurance company - to take care of some or most aspects of operating the plan. Elements of a plan that need to be handled include: - [Participation](https://www.irs.gov/retirement-plans/operating-a-401k-plan#participation) - [Contributions](https://www.irs.gov/retirement-plans/operating-a-401k-plan#contributions) - [Vesting](https://www.irs.gov/retirement-plans/operating-a-401k-plan#vesting) - [Nondiscrimination](https://www.irs.gov/retirement-plans/operating-a-401k-plan#nondiscrimination) - [Investing 401(k) monies](https://www.irs.gov/retirement-plans/operating-a-401k-plan#investing) - [Fiduciary responsibilities](https://www.irs.gov/retirement-plans/retirement-plan-fiduciary-responsibilities "Retirement plan fiduciary responsibilities") - [Disclosing plan information to participants](https://www.irs.gov/retirement-plans/operating-a-401k-plan#disclosing) - [Reporting to government agencies](https://www.irs.gov/retirement-plans/operating-a-401k-plan#reporting) - [Distributing plan benefits](https://www.irs.gov/retirement-plans/operating-a-401k-plan#distributing) - [Compliance](https://www.irs.gov/retirement-plans/operating-a-401k-plan#compliance) * ## Participation Typically, a plan includes a mix of rank-and-file employees and owner/managers. However, some employees may be excluded from a 401(k) plan if they: - Have not attained age 21; - Have not completed a year of service; or - Are covered by a collective bargaining agreement that does not provide for participation in the plan, if retirement benefits were the subject of good faith bargaining. Employees cannot be excluded from a plan merely because they are older workers. * ## Contributions Another design option you will have in establishing and operating a 401(k) plan is deciding on your business’s contribution (if any) to participants’ accounts in the plan. ### Traditional 401(k) plan If you decide to contribute to your 401(k) plan, you have further options. You can contribute a percentage of each employee’s compensation to the employee’s account (called a nonelective contribution), you can match the amount your employees decide to contribute (within the limits of current law) or you can do both. For example, you may decide to add a percentage- say 50 percent- to an employee’s contribution, which results in a 50-cent increase for every dollar the employee sets aside. Using a matching contribution formula will provide additional employer contributions only to employees who make deferrals to the 401(k) plan. If you choose to make nonelective contributions, the employer makes a contribution for each eligible participant, whether or not the participant decides to make a salary deferral to his or her 401(k) account. Under a traditional 401(k) plan, you have the flexibility of changing the amount of nonelective contributions each year, according to business conditions. ### Safe harbor 401(k) plan Under a safe harbor plan, you can match each eligible employee’s contribution, dollar-for-dollar, up to 3 percent of the employee’s compensation, and 50 cents on the dollar for the employee’s contribution that exceeds 3 percent, but not 5 percent, of the employee’s compensation. Alternatively, you can make a nonelective contribution equal to 3 percent of compensation to each eligible employee’s account. Each year you must make either the matching contributions or the nonelective contributions. ### Automatic enrollment 401(k) Under an automatic enrollment 401(k) plan with a qualified automatic contribution arrangement, the plan is exempt from the annual IRS testing requirement that a traditional 401(k) plan must perform. The initial automatic employee contribution must be at least 3 percent of compensation. Contributions may have to automatically increase so that, by the fifth year, the automatic employee contribution is at least 6 percent of compensation. The automatic employee contributions cannot exceed 10 percent of compensation in any year. The employee is permitted to change the amount of his or her employee contributions or choose not to contribute but must do so by making an affirmative election. The employer must make at least either: - A matching contribution of 100 percent for salary deferrals up to 1 percent of compensation and a 50 percent match for all salary deferrals above 1 percent but no more than 6 percent of compensation; or - A nonelective contribution of 3 percent of compensation to all participants ### SIMPLE 401(k) plan Employer contributions to a SIMPLE 401(k) plan are limited to either: 1. A dollar-for-dollar matching contribution, up to 3 percent of pay; or 2. A nonelective contribution of 2 percent of pay for each eligible employee. No other employer contributions can be made to a SIMPLE 401(k) plan, and employees cannot participate in any other retirement plan of the employer. The maximum amount that employees can contribute to their SIMPLE 401(k) accounts is \$16,000 in 2024 (\$15,500 in 2023, \$14,000 in 2022, \$13,500 in 2021 and in 2020 and \$13,000 in 2019). See [annual cost-of-living updates](https://www.irs.gov/retirement-plans/cola-increases-for-dollar-limitations-on-benefits-and-contributions "COLA increases for dollar limitations on benefits and contributions") for more information. An additional catch-up contribution is allowed for employees aged 50 and over. The additional contribution amount is \$3,500 in 2023 and 2024 (\$3,000 in 2022, 2021, 2020 and 2019). ### Contribution limits Total employer and employee contributions to all of an employer’s plans are subject to an overall annual limitation - the lesser of: - 100 percent of the employee’s compensation, or - \$69,000 for 2024 (\$66,000 for 2023; \$61,000 for 2022; \$58,000 for 2021; \$57,000 for 2020; \$56,000 for 2019). The amount employees can contribute under a traditional, safe harbor or automatic enrollment 401(k) plan is limited to \$23,000 in 2024 (\$22,500 in 2023, \$20,500 in 2022, \$19,500 in 2021 and in 2020 and \$19,000 in 2019). Traditional, safe harbor and automatic enrollment 401(k) plans can allow additional catch-up contributions in the amount of \$7,500 in 2023 and 2024, \$6,500 in 2022, 2021 and in 2020 and \$6,000 in 2019 for employees aged 50 and over. * ## Vesting Employee salary deferrals are immediately 100 percent vested- that is, the money that an employee has put aside through salary deferrals cannot be forfeited. When an employee leaves employment, he/she is entitled to those deferrals, plus any investment gains (or minus losses) on their deferrals. In SIMPLE 401(k) plans and safe harbor 401(k) plans, all required employer contributions are always 100 percent vested. In traditional 401(k) plans, you can design your plan so that employer contributions become vested over time, according to a vesting schedule. * ## Nondiscrimination Realizing 401(k) plan tax benefits requires that plans provide substantive benefits for rank-and-file employees, not only for business owners and managers. These requirements are referred to as nondiscrimination rules and cover the level of plan benefits for rank-and-file employees compared to owners/managers. Traditional 401(k) plans are subject to annual testing to ensure that the amount of contributions made on behalf of rank-and-file employees is proportional to contributions made on behalf of owners and managers. Safe harbor 401(k) plans and SIMPLE 401(k) plans are not subject to annual nondiscrimination testing. * ## Investing 401(k) monies After you decide on the type of 401(k) plan, you can consider the variety of investment options. One decision you will need to make in designing a plan is whether to permit your employees to direct the investment of their accounts or to manage the monies on their behalf. If you choose the former, you also need to decide what investment options to make available to the participants. Depending on the plan design you choose, you may want to hire someone either to determine the investment options to make available or to manage the plan’s investments. Continually monitoring the investment options ensures that your selections remain in the best interests of your plan and its participants. * ## Disclosing plan information to participants Plan disclosure documents keep participants informed about the basics of plan operation, alert them to changes in the plan’s structure and operations, and provide them a chance to make decisions and take timely action with respect to their accounts. The summary plan description (SPD)\- the basic descriptive document - is a plain-language explanation of the plan and must be comprehensive enough to apprise participants of their rights and responsibilities under the plan. It also informs participants about the plan features and what to expect of the plan. Among other things, the SPD must include information about: - When and how employees become eligible to participate in the 401(k) plan; - The contributions to the plan; - How long it takes to become vested; - When employees are eligible to receive their benefits; - How to file a claim for those benefits; and - Basic rights and responsibilities participants have under the Federal retirement law, the Employee Retirement Income Security Act (ERISA). The SPD should include an explanation about the administrative expenses that will be paid by the plan. This document must be given to participants when they join the plan and to beneficiaries when they first receive benefits. SPDs must also be redistributed periodically during the life of the plan. A summary of material modification (SMM) apprises participants of changes made to the plan or to the information required to be in the SPD. The SMM or an updated SPD must be automatically furnished to participants within a specified number of days after the change. An individual benefit statement (IBS) shows the total plan benefits earned by a participant, vested benefits, the value of each investment in the account, information describing the ability to direct investments, and (for plans with participant-direction) an explanation of the importance of a diversified portfolio. Plans that provide for participant directed accounts must furnish individual account statements on a quarterly basis. Plans that do not provide for participant direction must furnish statements annually. A summary annual report (SAR) is a narrative of the plan’s annual return/report, the Form 5500, filed with the Federal government (see Reporting to Government Agencies for more information). It must be furnished annually to participants. A blackout period notice gives employees advance notice when a blackout period occurs, typically when plans change recordkeepers or investment options, or when plans add participants due to corporate mergers or acquisitions. During a blackout period, participants’ rights to direct investments, take loans, or obtain distributions are suspended. * ## Reporting to government agencies In addition to the disclosure documents that provide information to participants, plans must also report certain information to government entities. ### Form 5500 series Plans are required to file an annual return/report with the Federal government. Depending on the number and type of participants covered, most401(k) plans must file one of the two following forms: [Form 5500, Annual Return/Report of Employee Benefit Plan](https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/forms "Form 5500, Annual Return/Report of Employee Benefit Plan"), or [Form 5500-EZ, Annual Return of One-Participant (Owners and Spouses) Retirement Plan PDF](https://www.irs.gov/pub/irs-pdf/f5500ez.pdf "2025 Form 5500-EZ (PDF)") For 401(k) plans, the Form 5500 is designed to disclose information about the plan and its operation to the IRS, the U.S. Department of Labor, plan participants, and the public. Most one-participant plans (sole proprietor and partnership plans) with total assets of \$250,000 or less are exempt from the annual filing requirement. A final return/report must be filed when a plan is terminated regardless of the value of the plan’s assets. ### Form 1099-R [Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. PDF](https://www.irs.gov/pub/irs-pdf/f1099r.pdf "2025 Form 1099-R (PDF)")is given to both the IRS and recipients of distributions from the plan during the year. It is used to report distributions (including rollovers) from a retirement plan. * ## Distributing plan benefits Benefits in a 401(k) plan are dependent on a participant’s account balance at the time of distribution. When participants are eligible to receive a distribution, they typically can elect to: - Take a lump sum distribution of their account, - Roll over their account to an IRA or another employer’s retirement plan, or - Purchase an annuity. *** ## Compliance Even with the best intentions, mistakes in plan operation can still happen. The U.S. Department of Labor and IRS have correction programs to help 401(k) plan sponsors [correct plan errors](https://www.irs.gov/retirement-plans/401k-plan-fix-it-guide "401(k) plan fix-it guide"), protect participants, and keep plan's tax benefits. These programs are structured to encourage you to correct the errors early. Having an ongoing review program makes it easier to spot and correct mistakes in plan operations. [Back to top](https://www.irs.gov/retirement-plans/operating-a-401k-plan#top)
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