Benefits

401(k), in plain English.

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A 401(k) is a US tax-advantaged retirement plan, typically with employer matching. Plans are subject to IRS contribution limits, vesting schedules, and non-discrimination testing. Workzoom Payroll for US employers handles per-pay-period 401(k) contributions, matches, and remittance to the plan provider.

How 401(k) works.

A 401(k) is a US employer-sponsored retirement plan funded by pre-tax or Roth employee deferrals, frequently with an employer match. Payroll owns the deferral calculation, the match formula, and deposit timing, and the timing is regulated: employee deferrals must be remitted as soon as they can reasonably be segregated from employer assets. Annual limits are set by the IRS and apply per individual across employers.

Where 401(k) goes wrong.

  1. Late deposit of employee deferrals, which is a prohibited transaction rather than an administrative slip.
  2. Match calculated per pay period with no true-up, so employees who front-load deferrals receive less match.
  3. Deferrals continuing past the annual limit when the employee also contributed at a prior employer that year.
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  • Canadian data residency AWS Canada (ca-central-1). Canadian customer data stays in Canada.
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Keep reading

Related terms.

Questions about 401(k)

A 401(k) is a US tax-advantaged retirement plan, typically with employer matching. Plans are subject to IRS contribution limits, vesting schedules, and non-discrimination testing. Workzoom Payroll for US employers handles per-pay-period 401(k) contributions, matches, and remittance to the plan provider.
A 401(k) is a US employer-sponsored retirement plan funded by pre-tax or Roth employee deferrals, frequently with an employer match. Payroll owns the deferral calculation, the match formula, and deposit timing, and the timing is regulated: employee deferrals must be remitted as soon as they can reasonably be segregated from employer assets. Annual limits are set by the IRS and apply per individual across employers.
Late deposit of employee deferrals, which is a prohibited transaction rather than an administrative slip.

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