401(k) glossary
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Administration
Plan year
Short definition
The plan year is the 12-month period a retirement plan uses for its records, testing and reporting. Most 401(k) plans use the calendar year, but the plan document can set a different 12-month period.
What a plan year is
The plan document names the plan year. It is the period over which the plan runs nondiscrimination tests, measures top-heavy status, allocates employer contributions and reports on Form 5500. A plan year can be the calendar year or any other 12 consecutive months, such as July 1 to June 30 to match the company’s fiscal year.
Some limits ignore the plan year. The employee deferral limit ($24,500 for 2026) and catch-up limits always apply by calendar year, because they follow the individual taxpayer.
Why it matters to employers
Plan-year timing sets most of your deadlines:
Item | Timing for a calendar-year plan |
|---|---|
Safe harbor notice | 30 to 90 days before January 1 |
ADP and ACP refunds without excise tax | March 15 |
Form 5500 | July 31, or October 15 with Form 5558 |
Top-heavy measurement | Balances on the prior December 31 |
It also decides which year’s dollar limits apply. For a plan year that does not follow the calendar, the compensation limit is the one in effect when the plan year begins.
Short plan years
A plan that starts mid-year, or changes its plan year, has a short plan year. Limits such as the compensation limit may have to be prorated, and a new safe harbor 401(k) generally needs a first plan year of at least three months.
Common mistakes
Assuming the plan year and the company’s tax year are the same without checking the document.
Applying calendar-year limits and plan-year limits to the wrong items.
Forgetting to prorate in a short plan year.
Missing the Form 5500 due date after changing the plan year.
Changing the plan year informally. It requires a plan amendment and, in some cases, IRS approval.
Sources
Internal Revenue Service: Form 5500 corner (https://www.irs.gov/retirement-plans/form-5500-corner), retrieved 2026-11-11 Internal Revenue Service: A guide to common qualified plan requirements (https://www.irs.gov/retirement-plans/a-guide-to-common-qualified-plan-requirements), retrieved 2026-11-11 Internal Revenue Service: 401(k) plan fix-it guide: The plan failed the 401(k) ADP and ACP nondiscrimination tests (https://www.irs.gov/retirement-plans/401k-plan-fix-it-guide-the-plan-failed-the-401k-adp-and-acp-nondiscrimination-tests), retrieved 2026-11-11 Internal Revenue Service: 401(k) plan overview (https://www.irs.gov/retirement-plans/plan-sponsor/401k-plan-overview), retrieved 2026-11-11
General information, not legal or tax advice.
