The dual process can be time-consuming and may lead to blunders if not carefully undertaken. This generally entails generating two separate reports – one that follows the calendar year (for purposes of preparing W2 forms and similar items), and another solely for 401(k) plan purposes (see below). Since the typical payroll system is based on an annual reporting system based on the calendar year, producing records for periods that straddle two calendar years requires additional effort. Some of the most frequently encountered compliance and administrative issues regarding non-calendar year 401(k) plans are briefly discussed below. Non-calendar plan years can also be more expensive to administer, since certain deadlines and plan limits do not coincide with those of calendar plan years, thereby requiring special scheduling, calculating, and monitoring to ensure timeliness and compliance. However, occasionally a 401(k) plan will follow a non-calendar plan year, often because some of the plan’s terms are governed by a union contract, or perhaps because the sponsoring employer’s fiscal year is based on a non-calendar year.īut because so many of a 401(k) plan’s governing rules are based on calendar year principles, having a non-calendar year plan does present special considerations. ![]() ![]() Special Considerations for Non-Calendar Year 401(k) Plansĭefined contribution plans, including 401(k) plans, generally operate on the basis of calendar years, which coincides with many of ERISA’s and the Internal Revenue Code (IRC)’s requirements, and prevents compliance and administration complications that can arise from using off-calendar plan years.
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