Income eligible for 401(k)
Your 401(k) plan through Slavic401k is set up so that 401(k) deferrals apply to all W-2 payments. This includes, but is not limited to, regular salary or hourly wages, bonuses, commissions, retroactive, paycheck tips, and owner's draws (if applicable). This means that all payments outside of regularly scheduled pay, such as bonus and commissions, will also have 401(k) employee deductions and any applicable employer matching contributions applied. If employees would like to select a different rate for bonuses and commissions they can do so in Justworks. If employees do not make a change, the rate that was selected for regular payments will be applied to all payment types.
If you offer a 401(k) plan outside of Justworks and Slavic401k, your plan's definition of eligible compensation will be found in your plan document. This differs from plan to plan and provider to provider. Please ensure that the manual deductions set up for your employees are applied to the appropriate payment types in accordance with your plan document.
Processing payments with a Slavic401k plan
Please note, when making a payment to your employee through Justworks, you will see an alert on the page that will note that 401(k) deductions and any applicable employer contributions will be applied against the payment, even if the Benefit Deductions is checked “No”.
Deferrals through Slavic401k
When your employees enroll with Slavic401k, the deferral rate they specify will be the rate applied on all eligible payments. As an example, if an employee elects 6% traditional (pre-tax) when enrolling, by default, all eligible pay processed through Justworks will have 6% deducted for their 401(k).
If the employee is receiving a bonus or commission, those payments will also have 6% applied against the payment by default, unless they have elected a different deferral rate for bonuses and commission. Employees can set their deferral rates for bonuses and commissions by logging into Justworks and going to Benefits> Retirement Planning> Slavic401k See details> Bonus and commissions edit. Any applicable employer match will also apply to eligible payments made through Justworks.
Please refer your employees to the Employee facing article - 401(k) Eligible Income - for additional information.
If an employee makes a change to their bonus and commission deferral rate it will be effective immediately (changes made after 3pm on the day payroll processes will be applied to the following payroll).
Please keep in mind that once a payment has been processed with a 401(k) deduction applied, we will not be able to cancel or amend the deduction in any way.
Regularly scheduled pay
If your employee has a set a separate deferral rate for bonuses and commissions in Justworks, the election will not impact their regular pay. To make changes to their regular pay deferral rate employees must login to their Slavic401k accounts and update their deferral rate there. Please note that changes made to regular pay deferrals take 3-5 business days to process.
If an employee has 6% traditional (pre-tax) elected for their regular pay but in Justworks, selected 10% traditional (pre-tax) to be applied to bonuses and commissions, their regularly scheduled pay will still have the 6% deduction while bonus and commissions will have 10% deductions applied.
Plan Year Restrictions
The IRS sets an annual limit for the amount that can be contributed to a 401(k) plan every year. However it is up to each plan to determine how they would like to define the plan year. The IRS requires that it be consistent and that it be documented.
For the Justworks 401(k) plan through Slavic401k we define the plan year as January 1st through December 31st. All funds must be deposited into the 401(k) account during that time frame. Compensation paid after December 31st, even if it was paid for time worked during the year, is not eligible for the Justworks 401(k) and must be applied to the new year.
For example, if you receive a paycheck in January for work done in December any 401(k) deferrals would be applied to the new year's annual limit.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.