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As we move from June into July, many business owners are taking a closer look at where things stand for the year. Hiring, payroll, employee benefits, and business planning may all look different than they did in January.
That makes the halfway point of the year a practical time to review your company’s 401(k) plan and consider whether it still fits the needs of your business and employees.
A mid-year review does not have to be complicated. It can simply be a chance to look at how the plan is being used, whether payroll is running correctly, whether new employees are being handled properly, and whether any plan changes or deadlines may need attention before year-end.
Why Mid-Year Matters
Many 401(k) plan issues do not show up all at once. They often build gradually throughout the year.
A missed enrollment date, an incorrect payroll setup, low employee participation, or a contribution error may seem small at first. By the end of the year, those items can sometimes lead to additional administrative work, employee questions, compliance concerns, or missed planning opportunities.
Reviewing your plan around the halfway point of the year may help identify items that need attention while there is still time to address them.
Employee Participation
One of the first things to review is whether employees are actually using the plan.
Offering a 401(k) can be a valuable employee benefit, but the plan may be more effective when employees understand it and feel encouraged to participate. Mid-year can be a good time to look at participation rates, deferral rates, and whether certain groups of employees may not be engaging with the plan.
If participation is lower than expected, business owners may want to review employee education, enrollment communication, plan design, or automatic plan features, if available.
New Hires and Eligibility
Summer is often a busy time for hiring, seasonal staffing changes, and onboarding. That makes July a practical time to review whether new employees are being handled correctly under the plan’s eligibility rules.
This may include confirming that employees are being notified when they become eligible, enrollment materials are being provided on time, payroll deductions are starting correctly, and part-time or seasonal employees are being tracked properly.
Small onboarding mistakes can create larger administrative issues later, especially if eligible employees are missed or contributions are delayed.
Testing and Year-End Surprises
For some plans, year-end compliance testing can create unexpected results. If participation among non-highly compensated employees is low, owners and highly compensated employees may face contribution limits or corrective distributions, depending on the plan design and testing results.
A mid-year review may help identify potential testing concerns before the year is over. This can give the business time to consider whether additional employee communication, plan design changes, or contribution strategies may be appropriate.
Waiting until year-end may limit the options available.
Payroll and Contribution Accuracy
Payroll and 401(k) administration need to work together closely. Even small errors can become more difficult to correct if they continue for several pay periods.
Mid-year is a good time to confirm that employee deferrals, employer matching contributions, profit-sharing contributions, loan repayments, and compensation definitions are being applied correctly.
This may be especially important if your company has changed payroll systems, added new employee groups, adjusted pay types, or made changes to bonuses, commissions, or overtime.
Contribution Opportunities
A 401(k) plan can be an important planning tool for business owners, executives, and key employees. Mid-year can be a good time to review whether contributions are on track and whether catch-up contributions may apply.
For 2026, the employee elective deferral limit for 401(k) plans is $24,500. Employees age 50 and older may be eligible for an additional catch-up contribution of $8,000. Under SECURE 2.0, employees ages 60 through 63 may be eligible for a higher catch-up contribution limit of $11,250, if the plan allows it.
Business owners and plan sponsors may also want to review how SECURE 2.0 changes could affect the plan, including Roth catch-up contribution requirements for certain higher-income employees.
Because contribution limits, plan provisions, and individual circumstances vary, it is important to review the current rules and speak with the appropriate advisor, tax professional, or plan provider before making decisions.
Plan Design and Business Changes
A retirement plan should be reviewed as the business changes. What worked when a company had 10 employees may not be the right fit when it has 30, 50, or 100 employees.
If your business has grown, merged with another company, changed ownership, added locations, or expanded hiring, it may be time to revisit the plan design.
This can include reviewing whether the employer match is still competitive, whether the plan supports recruiting and retention efforts, whether fees and investment options are being reviewed, and whether automatic enrollment or automatic escalation may make sense.
Planning Opportunities
Many business owners think about 401(k) plans from a compliance standpoint, but there may also be planning opportunities to review.
Depending on the business and plan structure, there may be tax credits, plan design options, employer contribution strategies, or employee education opportunities worth discussing.
The key is not waiting until the end of the year, when there may be less time to evaluate potential changes.
A Good Time to Pause
The halfway point of the year is a natural time to ask whether your 401(k) plan is still working the way you intended.
Is it helping employees save? Is it supporting your business goals? Is it being administered correctly? Are there issues that should be reviewed before year-end?
A mid-year review does not have to be complicated, but it may help business owners identify potential concerns, reduce administrative surprises, and make more informed decisions for the rest of the year.
If you are unsure whether your plan is on track, now may be a good time to review it with your advisor, plan provider, or tax professional.
This material is for general educational purposes only and is not intended as individualized investment, tax, legal, or plan administration advice. Business owners and plan sponsors should consult their advisor, tax professional, plan provider, or legal counsel regarding their specific situation.