401(k) compliance errors often start as small process gaps — but they can trigger participant impact, corrective contributions, and audit headaches if they repeat across a plan year. Use the checklist below to spot common breakdowns early and tighten your procedures before issues escalate.

Not sure who “owns” which tasks? Start with 401(k) Plan Sponsor vs Plan Administrator: Key Differences Explained so responsibilities are clear before you troubleshoot errors.

Eligibility & Enrollment Errors

• Failure to include all eligible employees in the plan
• Failure to follow plan eligibility terms in operation
  
  Tracking eligibility consistently (including part-time and returning employees) is the fastest way to prevent recurring compliance failures.

Deferral & Compensation Errors

• Incorrect handling of deferral elections
• Using inconsistent definitions of compensation for deferrals
• Failure to correctly process deferral elections across eligible compensation
  
  If deferrals were missed due to payroll setup or compensation definitions, corrections may be required — start with How to Correct Missed Participant Deferrals.
  

Deposit Timing Errors

• Failure to deposit employee elective deferrals on a timely basis
  
  Late deposits are a common trigger for corrective earnings calculations — use this 401(k) audit checklist to confirm you have a documented deposit policy and support.

Testing & Contribution Errors

• Failure to comply with Section 402(g) contribution limits and correct excess deferrals
• Failure to apply non-discrimination testing (ADP/ACP) correctly
• Failure to make required employer contributions (including top-heavy minimums)
  
  These types of errors often surface when plan calculations aren’t periodically reviewed — especially after compensation changes or year-end adjustments — making regular testing and reconciliation critical.

Distributions, Hardships & Loans

• Improper handling of hardship distributions
• Failure to correctly administer participant loans (Section 72(p) compliance)
  
  Distribution and loan errors typically occur when plan rules aren’t consistently applied across payroll, HR, and recordkeeper processes — increasing both compliance risk and participant impact.

Plan Document & Reporting Errors

• Failure to update plan documents for regulatory changes
• Failure to distribute required plan communications (e.g., Summary Plan Description)
• Failure to file required reports (e.g., Form 5500)
  
  Document updates and participant disclosures are easiest to manage when ownership and timing are assigned — don’t leave them to year-end.

It can be a very complicated process when you are the administrator of an employee plan. Don’t fall subject to fines and fees for your plan for not being in compliance. Having a professional to assist you will prevent these common errors and save your plan from hefty fines.

New to 401(k) audits? Start with Do You Need a 401(k) Audit? Requirements, Timeline & What to Expect.

If your plan is approaching the audit threshold — or you’re seeing repeat issues year over year — working with a specialized auditor can reduce rework and help you address root causes earlier. Learn more about Anders 401(k) audits or request a free consultation below.