Regulatory Briefs
Key Takeaway
The following is a listing of important regulatory items for sponsors of qualified retirement plans.
Important Limits
| Important Limits | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| IRC § 402(g) calendar year limit on 401(k), 403(b), and 457 elective deferrals** | $20,500 | $22,500 | $23,000 | $23,500 |
| Catch-up deferral (age 50 or older) limit on 401(k), 403(b), and governmental 457* | $6,500 | $7,500 | $7,500 | $7,500 |
| SIMPLE 401(k)/IRA calendar year limit** | $14,000 | $15,500 | $16,000 | $16,500 |
| SIMPLE catch-up contribution limit* | $3,000 | $3,500 | $3,500 | $3,500 |
| Annual limit on compensation | $305,000 | $330,000 | $345,000 | $350,000 |
| Highly compensated employee: over 5% owner or compensation over | $130,000 in 2021 | $135,000 in 2022 | $150,000 in 2023 | $155,000 in 2024 |
| Key employee: over 5% owner, over 1% owner > $150,000, or officer over | $200,000 | $215,000 | $220,000 | $230,000 |
| Limit on annual contributions to a defined contribution plan | $61,000 | $66,000 | $69,000 | $70,000 |
| Social Security taxable wage base | $147,000 | $160,200 | $168,600 | $176,000 |
| Defined benefit plan annual benefit limit | $245,000 | $265,000 | $275,000 | $280,000 |
*Special catch-up contribution limit for participants ages 60-63 (if permitted by plan) is $11,250 for 401(k), 403(b), and governmental 457(b) plans and $5,250 for SIMPLE plans.
For off-calendar plan year ends, the deferral limits are based on the calendar limits as noted above. The compensation limit is based on the calendar year in which the plan year begins (e.g., for a 10.01.2024 – 09.30.2025 PYE, the 2024 limit of $345,000 is used).
Return of Excess
| Return of Excess** | Description | Due Date |
|---|---|---|
Excess Contribution 401(k) contributions that fail ADP test |
| March 15 For calendar-year plans |
Excess Aggregate Contribution 401(m) contributions that fail ACP test |
| March 15 For calendar-year plans |
Excess Deferral Elective deferrals in excess of calendar year limit |
| April 15 |
Excess Annual Addition Limit on annual contributions to plan |
| December 31 (Generally) For plans with calendar-year limitation year |
| Correction Programs |
| Timing varies based on type of failure |
**If excess contributions are not corrected, a disqualification condition may exist. Please see last page for important disclosures.
Administrative Reminders
| Plan Requirements | Description | Due Date |
|---|---|---|
| Deposit of employee deferrals and loan payments | The Department of Labor (DOL) requires employers to deposit employee deferrals (pre-tax, after-tax, and Roth) in the plan as soon as administratively feasible. Plans of less than 100 participants at the beginning of the year must submit deferrals and loan payments by the seventh business day following the payroll date. All others must submit contributions as soon as possible following payroll. The DOL takes an aggressive enforcement approach on this issue. | No later than 7th business day for plans with <100 participants; all others ASAP |
| Calculation of matching contributions | The terms of your plan control whether matching contributions are calculated on a payroll or annual basis. If matching contributions are calculated on a payroll basis, participants must spread their salary deferrals over the entire plan year to receive the maximum matching contribution. If the plan annualizes the match, timing of deferrals is not important. For example: Assume the match is 50% on the first 6% of employee deferrals, the participant's annual salary is $100,000, and he/she defers $6,000 by mid-year then stops. If the match is made on a payroll basis, it would be $1,500 (50% x 6% x $50,000). In contrast, if the match is annualized, it would be $3,000 (50% x 6% x $100,000). | Throughout plan year |
| Form 5500 | Due at the end of the seventh month after plan year end. A two-and-a-half- month extension can be obtained by filing Form 5558 before the due date for Form 5500. Extension may also be granted until due date of employer’s federal tax return. For a short plan year, Form 5500 and applicable schedules are due by the last day of the seventh month after short plan year ends. | July 31 For calendar- year plans (October 15 with an extension) |
| Summary annual report (SAR) | Summary of Form 5500 that includes a basic financial statement of the plan. | Two months after Form 5500 is due |
| Military leave | Employees who are, or have been, on military leave have rights regarding retirement benefits. With regard to the retirement plan, an employer must credit a returning veteran with any employer contribution they would have received, and the employee must be given the opportunity to make up any salary deferral contributions. If the employee makes up salary deferrals, then any matching contribution must be credited to them. | Each time a participant returns from military leave |
| Summary plan description (SPD) | Plan summary required to be delivered to all eligible participants and beneficiaries. If you have employees who do not read English, attach the following statement to the SPD in the employee’s native language. “This booklet contains a summary in English of your plan rights and benefits under (Plan Name). If you have difficulty understanding any part of this booklet, contact (Name), the plan administrator, at (address). Office hours are from (Time) a.m. to (Time) p.m. Monday through Friday. You may also call the plan administrator’s office at (Phone Number) for assistance.” | Within 90 days after an individual becomes an eligible participant or beneficiary |
| Summary of material modification (SMM) | Description of changes to the information contained in the SPD, as well as any material modifications to the plan. | 210 days after plan year change was made |
| Notices and disclosures | In addition to the above, most qualified plans are required to send certain notices and disclosures to participants on a regular basis. This requirement may include, but is not limited to, Participant Plan and Investment Fee Disclosure, Safe Harbor Notice, Qualified Default Investment Alternative Notice, Automatic Enrollment and Automatic Escalation Notice, and Universal Availability Notice. | Generally, upon enrollment and annually 30 days before the beginning of the plan year |
Cost-of-living fee adjustment (COLA) – If applicable, each January 1 Alerus may adjust its annual fees (other than asset-based fees) in an amount equal to 50% of the CPI-U for the 12-month period ending August 31 of the preceding year, not to exceed 3% and rounded up to the nearest whole dollar. The Alerus COLA for 2025 is 1.25% for plans where this is applicable.
This communication is provided for informational and discussion purposes only and is subject to change without notice. Trust services are offered through Alerus Financial, N.A., which does not offer legal or tax advice. Plan sponsors should always consult the plan’s legal counsel or tax advisor to determine how this information may impact your situation and the application of any law to your plan. Statements of fact are from sources considered reliable, but no representation or warranty is made as to their completeness or accuracy.