Income eligible for 401(k)
Your 401(k) plan through Slavic is set up such that 401(k) deferrals apply to all W-2 payments, including bonuses, commissions, and owners draws (if applicable). This means that all payments outside of regularly scheduled pay, such as bonus and commissions, will have 401(k) employee deductions and any applicable employer matching contributions.
What is included?
If your 401(k) plan is through Slavic401k, “compensation” includes all W-2 wages paid through Justworks. This includes, but is not limited to, regular salary or hourly wages, bonuses, and commissions.
If you offer a 401(k) plan outside of Justworks and Slavic401k, what is defined as eligible compensation for 401(k) will be in accordance with the plan you have with your 401(k) provider. Please ensure that the manual deductions set up for your employees are in accordance with you plan document.
Processing payments with a Slavic401k plan
Please note, when making a payment to your employee through Justworks, you will notice 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 initially 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 your 401(k).
If the employee is receiving a bonus or commission, by default, those payments will also have 6% applied against the payment, unless they have elected a different deferral rate for bonuses and commission using the “Bonus Deferral Election Form” (BDEF). 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 - on how to use the form.
If an employee submits a Bonus Deferral Election Form (BDEF) to Justworks, it will take 5 - 10 business days from submission to process. The bonus and commission payments will not reflect your employees’ election until after the form is processed. Therefore, if the employee submits the form for a change after a payment has processed, the change will not be reflected on that payment.
If you have an employee who expresses concerns about the form not getting processed in time, and the bonus/commission payment has not yet processed, we recommend you work with the employee to explore the option of rescheduling the payment. Once a payment has been processed with a 401k a deduction applied, we will not be able to cancel or amend the deduction in any way.
Regularly scheduled pay
If your employee has a Bonus Deferral Election Form processed, the election they make on the form will not impact their regular pay.
If they have 6% traditional (pre-tax) elected for their regular pay but submitted a Bonus Deferral Election Form (BDEF) for 10% traditional (pre-tax), their regularly scheduled pay will still have the 6% deduction while bonus and commissions will reflect the 10% that they elected.
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.