Preparing Your 401(k) Plan for Year-End: Key Steps Top Providers Recommend
As the year winds down, employers have a critical opportunity to review and optimize their 401(k) plans. Preparing your plan for year-end not only ensures compliance with regulations but also helps employees maximize their retirement savings.
Top 401(k) providers recommend a proactive approach to year-end planning. Here’s what employers in 2025 should focus on to make the most of their retirement benefits.
Conduct a Year-End Plan Review
Review Contributions and Participation Rates
Check that both employer and employee contributions are on track. Ensure that:
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Employee deferrals are maximized within IRS limits
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Employer matching contributions are being allocated correctly
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Participation rates remain high across all eligible employees
A review helps identify gaps early and provides time to address them before year-end.
Evaluate Investment Options
Assess the performance and risk levels of your plan’s investment lineup:
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Compare fund performance against benchmarks
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Confirm that target-date funds and other options meet employees’ retirement goals
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Consider adding or adjusting options based on plan objectives
Top providers emphasize that a well-structured investment menu supports better retirement outcomes.
Ensure Compliance and Fiduciary Oversight
Conduct Required Testing
Year-end is a critical time to perform compliance testing, including:
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Nondiscrimination tests (ADP/ACP)
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Top-heavy testing
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Eligibility and coverage verifications
Failing these tests can result in penalties or corrective actions, so early review is essential.
Document Fiduciary Decisions
Employers acting as fiduciaries should maintain proper documentation of:
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Investment selections
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Plan design changes
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Committee decisions
Keeping thorough records protects the company and demonstrates adherence to ERISA requirements.
Communicate With Employees
Remind Employees About Contribution Limits
Ensure employees know the maximum 401(k) deferrals for the year and any catch-up contributions for those over 50. Timely reminders can help them take full advantage of tax-deferred savings opportunities.
Educate About Investment Choices
Provide employees with updates on:
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Available funds
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Risk and performance metrics
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Benefits of diversification
Education encourages engagement and can improve participation and long-term retirement outcomes.
Review Plan Fees and Expenses
Evaluate Administrative and Investment Costs
High fees can erode retirement savings over time. Conduct a detailed review of:
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Recordkeeping and administrative fees
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Investment management expenses
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Third-party service costs
Top providers recommend comparing these fees to industry benchmarks to ensure your plan is cost-effective.
Consider Changes if Needed
If fees are above average or services could be improved, now is the time to discuss options with your provider. Making adjustments before year-end ensures employees benefit immediately and helps the company maintain fiduciary responsibility.
Prepare for 2026 Plan Design Updates
Adjust Matching Formulas or Contribution Structures
Consider whether your current employer match, profit-sharing, or contribution strategy aligns with business goals and employee needs. Year-end is the ideal time to implement changes for the new plan year.
Plan for Regulatory Updates
Stay informed about IRS limits, Department of Labor guidance, and industry best practices. Preparing now reduces the risk of surprises and ensures a smooth transition into 2026.
Partner With a Trusted 401(k) Provider
Top 401(k) providers emphasize the value of guidance and support. Working with an experienced provider can help employers:
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Conduct accurate year-end reviews
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Optimize plan design and investments
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Stay compliant with regulations
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Improve employee engagement and satisfaction
A proactive approach now can save time, reduce risk, and ensure both employers and employees maximize retirement outcomes.
Take Action Today
Year-end is the perfect time to take a comprehensive look at your 401(k) plan. By reviewing contributions, investments, compliance, fees, and employee communication, employers set themselves and their employees up for success in 2026.
Schedule a consultation with a knowledgeable 401(k) provider today to ensure your plan is optimized and ready for the new year.