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Explaining 401(k) Risk and Compliance

Companies who offer 401(k)s have additional responsibilities for insuring the plan against risk, complying with IRS guidelines for non-discrimination, and reporting on the plan.

  • A fidelity bond, which protects the company from liability due to fraud, must be purchased by each company with a 401(k) plan. Contact Support to purchase a fidelity bond through Zenefits' Business Insurance team.
  • Each plan must have a fiduciary who will be responsible for making decisions about the plan. 
  • Each year, 401(k) plans are subject to non-discrimination testing to ensure that no employees are disproportionately favored by the plan. 
  • These tests, which include the ADP, ACP, and Top-heavy tests, primarily examine the participation of Key and Highly-Compensated Employees (HCEs).
  • Employers who make contributions to employee 401(k)s through safe harbor plans (and observe other administrative duties) are usually exempt from the non-discrimination tests.
  • All 401(k) plan providers must file Form 5500, which reports various information about the plan, including its assets, participants, and financial activities. 


401(k) Fiduciary

This page outlines general information on fiduciaries and is not intended to provide legal advice. Please seek legal counsel for further assistance. A fiduciary is an individua... Learn more

Non-discrimination testing for 401(k) plans

To help ensure that companies extend their 401(k) plans equitably to employees, the IRS requires that the benefits received by more amply paid employees are not disproportionate... Learn more

ADP, ACP, and Top-Heavy Non-discrimination Tests

The ADP, ACP, and Top-Heavy tests determine whether a company's 401( k ) plan disproportionately favors certain employees. The ADP Test The average deferral perc... Learn more

Key or Highly Compensated Employees for a 401(k) Plan

Non-discrimination testing (also known as compliance testing) examines the contributions of Key and Highly Compensated Employees to determine whether all employees are treated e... Learn more

How to ensure Form 5500 compliance

The Form 5500 Series is part of ERISA compliance for 401( k ). Form 5500 is intended to assure that employee benefit plans are operated correctly and the rights of participants ... Learn more

401(k) Forfeiture

A forfeiture is part of an employee’s account balance (employer contributions) that is lost because it was not vested when the employee was terminated. Since these funds come f... Learn more

Employer contributions to 401(k)s

Employers can match employee 401k  contributions by establishing a Safe Harbor 401k plan. For Safe Harbor plans, employers match up to 4% of an employee's salary.To learn what... Learn more

How to purchase fidelity bonds for 401(k) plans in Zenefits

Companies who do not have an existing fidelity bond can reach out to Zenefits'  partner for business insurance needs, Embroker. Learn more

Annual contribution limit for 401(k)s

In 2020, the pre-tax maximum annual contributions for employees are: $19,500 if under 50 $26,000 if over 50 Please see this IRS page for more information. Learn more

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