401(k) Answer Book, 2026 Edition

1. Introduction to 401(k) Plans and Qualification Requirements

• History of 401(k) Plans
• Advantages and Disadvantages of 401(k) Plans
• Taxes and 401(k) Plans
• Types of Entities That May Use 401(k) Plans
• When a 401(k) Plan Is Appropriate
• Market for and Utilization of 401(k) Plans
• Future of 401(k) Plans
• Policy and Legislation Affecting 401(k) Plans
• 401(k) Plan Design Options and Objectives
• Basic Qualification Requirements

2. 401(k) Plan Contributions

• Types of 401(k) Plan Contributions and Automatic Contribution Arrangements
• Safe Harbor 401(k) Plan
• Qualified Automatic Contribution Arrangements
• Analyzing the Roth Option

3. Other Types of 401(k) Plans and Plan Documents

• Starter 401(k) Plans
• SIMPLE 401(k) Plans
• Eligible Combined Plans
• Multiemployer and Multiple Employer 401(k) Plans
• Plan Document Alternatives
• Advance IRS Approval of Plan Documents

4. Plan Services and Service Providers

• 401(k) Plan Services
• Selecting Plan Administration Services
• Tools for Selecting Plan Service Providers
• Selecting Investment Services
• Allocation of Earnings and Expenses
• Payment of Fees and Expenses
• Legal and Regulatory Initiatives Concerning 401(k) Plan Fees
• DOL Final Rule on Service Provider Fee Disclosure
• Other Activity on Fee Disclosure

5. Fiduciary and Prohibited Transaction Rules

• Fiduciary Issues
• Prohibited Transactions
• Managing Fiduciary Liability in a 401(k) Plan
• Managing Personal Liability
• The Voluntary Fiduciary Correction Program
• Fiduciary Concerns Related to Specific Investment Products

6. Investing Plan Assets

• Primary Asset Classes
• Investment Vehicles
• Asset Allocation Strategy
• Managed Account Service
• Employer Securities
• Directed Trustee Considerations
• 401(k) Stock Ownership Plans
• Self-Directed Brokerage Options
• Investment Policies
• Selecting and Monitoring Plan Investments
• Proxy Voting and Shareholder Engagement
• Mutual Fund Investigations
• Investment Fees and Revenue Sharing

7. Participant Direction of Investments - ERISA Section 404(c)

• Participant-Directed Plans
• Broad Range of Investment Alternatives
• Independent Exercise of Control
• Disclosure Requirements
• Investment Change Frequency
• Investment Elections
• Fiduciary Liability Relief
• Qualified Default Investment Alternatives
• Blackouts and Changes in Investment Options
• Litigation Involving Participant-Directed Plans

8. Participant Communication and Education

• An Effective 401(k) Communication Program
• Department of Labor Guidance on Participant Investment Education
• Individual Retirement Planning

9. Contribution Limits

• Limits on Elective Deferrals
• Code Section 415 - Annual Addition Limits
• Code Section 404 - Deduction Limits

10. Data for Nondiscrimination Testing

• Who Is the Employer?
• What Is a Plan?
• Who Is an Employee?
• Who Is a Highly Compensated Employee?
• What Is Compensation?

11. Minimum Coverage Testing

• Minimum Coverage
• Correcting Minimum Coverage Failure
• Minimum Participation

12. General Nondiscrimination Testing

• Testing of Employer Nonelective Contributions
• Permitted Disparity
• Nondiscriminatory Availability of Benefits, Rights, and Features

13. ADP and ACP Testing

• Passing ADP and ACP Testing on a Deemed Basis
• The Actual Deferral Percentage Test
• The Actual Contribution Percentage Test

14. Top-Heavy Rules

• Top-Heavy Testing
• Minimum Vesting
• Minimum Contributions
• Top-Heavy Strategy

15. Participant Loans, Hardship Withdrawals, and In-Service Distributions

• Participant Loans
• Hardship Withdrawals
• In-Service Distributions
• History of Relief for Specific Disasters

16. Distributions Subsequent to Termination of Employment

• Optional Forms of Benefit
• Required Minimum Distributions
• Distributions to Participants Called to Active Military Duty
• Rollover Rules
• Withholding on Contributions and Distributions
• Claims for Benefits

17. Spousal Rights

• Survivor Annuity Requirements
• Annuity and Other Lifetime Income Products
• Qualified Domestic Relations Orders

18. Taxation of 401(k) Plans

• Payroll Taxes
• Taxation and Reporting of Distributions and Pre-Tax Contributions
• Taxation of Life Insurance
• Taxation of Participant Loans
• Taxation of Distribution of Excess Deferrals
• Taxation of Distributions of Excess Contributions and Excess Aggregate Contributions
• Taxation of Roth Distributions and In-Plan Roth Rollovers
• Rollovers of Roth Accounts
• Other Taxes on 401(k) Plan Distributions
• Filing Requirements for Distributions
• Distribution Planning

19. Reporting and Disclosure

• IRS and DOL Form 5500 Reporting
• EFAST2
• Timings and Penalties
• Special Filing Issues
• Participant Disclosures
• Use of Electronic Technology
• Record Retention Under ERISA

20. Correcting 401(k) Plan Qualification Errors

• Employee Plans Compliance Resolution System
• Self-Correction Program
• Voluntary Correction Program
• Audit Closing Agreement Program
• Common Failures and Correction Methods
• Available Correction Methods Prior to Audit

21. Plan Terminations, Mergers, Spinoffs, and Abandoned Plans

• Plan Terminations
• Missing Participants
• Partial Plan Termination
• Mergers and Spinoffs
• Plan Considerations During Major Business Transactions
• Plan Considerations During Bankruptcies
• Abandoned Plans

22. 401(k) Plan Alternatives

• Individual Retirement Arrangements (IRAs)
• Simplified Employee Pensions (SEPs) and Salary Reduction SEPs (SARSEPs)
• SIMPLE IRAs and SIMPLE 401(k) Plans
• Cash Balance Plans
• Floor-Offset Plans
• Nonqualified Deferred Compensation (NQDC) Plans
• Section 403(b) Plans - Tax-Sheltered Annuities
• Section 457(b) Eligible Deferred Compensation Plans
• State Savings Programs for Non-Government Employees

APPENDICES

• Sample Safe Harbor 401(k) Plan Participant Notice
• Automatic Contribution Arrangement Comparison Chart
• Sample Notice for Plans with an Automatic Contribution Arrangement (ACA)
• Sample Notice for Plans with an Eligible Automatic Contribution Arrangement (EACA)
• Sample Notice for Plans with a Qualified Automatic Contribution Arrangement (QACA)
• Sample Notice for Safe Harbor QACA Plans with an Eligible Automatic Contribution Arrangement (EACA)
• Sample Plan Sponsor Fiduciary Manual
• Sample Plan Sponsor Fiduciary Checklist
• Sample ERISA Section 404(c) Compliance Checklist
• Sample Qualified Default Investment Alternative (QDIA) Notice
• Sample ERISA Section 404(a) Participant Disclosure Checklist
• Key Indexed Limits (2025-2026)
• DOL Model Blackout Notice
• IRS Model Diversification Notice for Plans Holding Publicly Traded Employer Securities
• Model Participant Disclosure Regarding Eligible Investment Advice Arrangements (EIAAs)
• IRS Rollover Chart
• 401(k) Plan Compliance Calendar
• DOL Model Comparative Chart
• Summary of Provisions in 401(k) Plan Legislation Since 2001

GLOSSARY

TABLES

• Internal Revenue Code Sections
• United States Code
• ERISA
• Pension Protection Act of 2006
• Cases
• Code of Federal Regulations
• Treasury Regulations
• Department of Labor Regulations, Opinions, and Field Bulletins
• Miscellaneous IRS Announcements, Notices, Memoranda, Rulings, and Procedures

INDEX