Paychex Policy Requiring January 1 Plan Effective Date for New Plans

[Micks]

 

I am looking for input from others who work with Paychex recordkeeping.

We recently received the following explanation from Paychex:

"Under Paychex recordkeeping, the Effective Date of the plan will always be January 1 of the inception year. On the line below it, you will see the effective date for deferrals as 11/9/2024."

In the adoption agreement, the Plan Effective Date is listed as 1/1/2024, while the Pre-Tax and Roth Effective Deferral Date is listed as 11/9/2024 and the 2024 filed 5500 shows 11/1/2024.

My questions are:

1. Is it Paychex's standard practice to establish all new plans with a January 1 effective date for the inception year, regardless of when the plan is actually adopted?
2. If the employer adopts the plan later in the year (e.g., November 2024), is there any concern with having the document show a 1/1/2024 Plan Effective Date while deferrals begin on 11/9/2024?
3. Have any auditors, TPAs, or practitioners encountered operational, compliance, or disclosure issues arising from this approach?
4. Is there IRS guidance or industry practice supporting this distinction between the plan effective date and the deferral effective date?

I would appreciate hearing how others have handled this with Paychex or other bundled providers.

Thanks!

[John Feldt ERPA CPC QPA]

It allows the full year compensation limit to apply. This is a very common practice in the industry.

in your example, November was too late for a calendar year plan to be safe harbor in 2024. How did the ADP test turn out?

Was there a top-heavy surprise?

[Bill Presson]

I’m confused by the 11/1/24 date mentioned for the 5500. What does that mean?

[401kology]

Agree with Bill. If the effective date of the plan document is 1/1/2024, that is the effective date that should be reported on the 5500, not the deferral effective date.

 

[Micks]

Thank you for your insights.  We will request that the plan effective date on the 5500 agrees with the adoption agreement date of 1/1

 

[Micks]

On 7/27/2026 at 1:16 PM, John Feldt ERPA CPC QPA said:

It allows the full year compensation limit to apply. This is a very common practice in the industry.

in your example, November was too late for a calendar year plan to be safe harbor in 2024. How did the ADP test turn out?

Was there a top-heavy surprise?

No top heavy surprises. They passed all the NDT.