Compliance Stuff

Contributions Employers can contribute to their employees’ 401(k) accounts in two main ways:  matching contributions  and nonelective contributions. Matching contributions are tied to employee deferrals—employers contribute only when employees do. In contrast, nonelective contributions are made to eligible employees regardless of whether they contribute to the plan themselves. Understanding nonelective contributions is critical for both employers and employees. For employers, they offer flexible tools to meet plan goals—whether avoiding annual testing, maximizing owner contributions, rewarding employees, or fixing compliance issues. For employees, they can mean guaranteed retirement savings even without personal deferrals. This guide breaks down the three major types of nonelective contributions—safe harbor, profit sharing, and corrective (QNECs)—and when each may be appropriate. What Are 401(k) Nonelective Contributions? Nonelective contributions are employer contributions ma...