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Navigating Year-End Compliance Testing for Retirement Plans

Writer's picture: Michelle MarshMichelle Marsh

a person looking at their retirement plan on a laptop

As we enter January, employers and retirement plan sponsors are on the clock to prepare for the March 15th year-end compliance testing deadline. This isn’t just a regulatory task though—it’s a chance to make sure your retirement plan works fairly for all employees while staying compliant with the rules. 

Here’s why this deadline matters and what steps you can take now to prepare. 


Don't miss these important 2025 compliance deadlines. Download your checklist today!

What Is Year-End Compliance Testing? 

Retirement plans like 401(k)s must follow specific rules to maintain their tax-qualified status. These regulations are designed to ensure fairness, preventing plans from favoring highly compensated employees (HCEs) over non-highly compensated employees (NHCEs)

Key tests, such as the Actual Deferral Percentage (ADP), Actual Contribution Percentage (ACP), and Top-Heavy tests, are conducted annually to assess whether contributions and benefits are distributed equitably. If these tests reveal imbalances, corrective actions may be necessary to maintain compliance and protect the plan’s tax advantages


Why March 15th is Important 

For plans with a calendar-year fiscal period, March 15th is the final day to fix any issues found in last year’s compliance tests for most 401(k) plan. Missing this date can lead to penalties, like a 10% excise tax on excess contributions. 


Acting now helps avoid these challenges and keeps everything on track. 



Quick Self-Check: Is Your Retirement Plan Ready? 

Take a look at these questions to assess your plan’s compliance readiness: 


Employee Contribution Patterns: 

  • Do highly compensated employees (HCEs) contribute significantly more to the plan than non-highly compensated employees (NHCEs)? 

  • Have you monitored these trends to avoid imbalances? 

  • Have you adopted a Safe Harbor plan if there is an imbalance? 


Data Accuracy:

  • Are all employee classifications and contribution details up-to-date in your system? 

  • Have you resolved any discrepancies in plan records for the past year? 


Plan Education: 

  • Do your employees understand how the plan’s rules support fairness for everyone? 

  • Have you communicated any recent updates or compliance measures? 


Issue Resolution: 

  • Do you have a process in place to address issues quickly if testing reveals imbalances? 

  • Are you confident corrective actions can be taken by the March 15th deadline?

     

Score yourself: 

If you answered “Yes” to most questions, you’re on track! 

If you answered “No” to a few, now’s the time to focus on those areas to ensure compliance. 



How to Get Ready 

There’s still time to take these steps: 


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Talk to Experts 

Work with a retirement plan administrator or consultant who understands the testing process and can handle the details for you. 



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Check Your Plan Data 

Take a close look at your plan’s data now. Spotting problems early gives you more time to fix them. 



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Educate Employees 

Share why compliance testing is important with your team. When employees understand how the process keeps the plan fair, they’re more likely to see its value. 


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Plan for Fixes 

If the tests show any issues, act quickly. Addressing these sooner rather than later helps reduce stress as the deadline approaches. 





Why This Matters 

March 15th isn’t just another deadline. It’s an opportunity to show your commitment to all employees by keeping the retirement plan fair and compliant. Taking the right steps now also protects the plan’s tax advantages and keeps things running smoothly. 


 

Let RPCSI Help 

If compliance testing feels overwhelming, RPCSI is here to help. We handle everything from testing and reporting to corrective actions and employee education. 

Don’t wait until the last minute. Reach out to RPCSI today to keep your retirement plan in good shape. With a little planning, you can meet the deadline and keep your focus on supporting your team’s financial goals. 


Don't miss these important 2025 compliance deadlines. The checklist helps you keep track of important defined contribution plan deadlines. Download your checklist today!

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