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Vestwell 401(k) Plan Sponsors:  How to Prepare for Year-End Discrimination Testing

The IRS requires that 401(k) plans be tested annually to ensure that the benefits are given in a non-discriminatory manner. This means that employees who are highly paid and owners/officers should not receive a greater benefit than anyone else who participates in the plan. The IRS also requires that plan sponsors complete and file Form 5500, which is a benefit plan tax form that reports information about the plan to the IRS.

As a Vestwell 401(k) plan sponsor, Vestwell will be responsible for both the annual testing process and the preparation of your Form 5500. You will need to ensure that Vestwell has the most up-to-date information about each employee so that they can conduct the annual testing process with accurate information. Each year after your plan year ends, which in most cases is December 31st, you will review a census file of employee information and answer a questionnaire in your Vestwell plan sponsor portal. 

Preparing your Vestwell Census File

If you have a standard (non-safe harbor) plan with Vestwell, you will receive an email from Vestwell in early January with a checklist of tasks for preparing your information for year-end testing. Safe harbor plans with Vestwell will receive an email in February, and you have until March to complete your checklist.

You have two options for submitting a census file to Vestwell:

Option 1: Use the Vestwell Census File. You can log into your Vestwell Employer Portal and download the census file for last year provided by Vestwell. This file contains pre-populated information for every employee who had earnings in the previous year, based on the payroll data that Patriot submits to Vestwell each time you run a payroll.  

It’s important to note that there could be circumstances where Vestwell may not have received all of your payroll updates throughout the year. This could be due to the following reasons:

  • You started with Patriot after the first payroll of the calendar year. Even though you may have entered payroll history in Patriot, payroll history is not passed on to Vestwell.
  • You may have voided paychecks after Patriot has sent the info to Vestwell without contacting Vestwell to notify them of the void.
  • You have needed payroll edits to fix paychecks after payroll has been run.  

Option 2: Use the Year End Census File Report From Patriot. Even if none of the above events apply, we highly recommend using our employee census report, so that you can be assured you are using the most accurate payroll data for Vestwell to use for their tests.

  • Go to Reports > Payroll Reports > Employee Census.
  • As a Vestwell customer, you will see a dropdown to select the report you want to run. Choose “Year End 401(k) Retirement Plan Census.”
  • Select the appropriate plan year and click “Run Report.”
  • The census report data will display. Note the entire calendar year of employee data will be included, even if you didn’t have a Vestwell plan the entire year.
  • Click “Download Spreadsheet” to download this file to your computer, and upload this file into your Vestwell portal. You will be prompted to reauthenticate with your MFA credentials for security purposes.

Vestwell has more specific information in their help center that contains the timeline and details. See Compliance & Year-End Testing.

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