When you run a special payroll for bonuses, commissions, or off-cycle pay, 401(k) contributions work the same way they do for regular payroll. This article explains how contribution rates carry over to special payrolls, how employer contributions apply, and what plan administrators need to do to report special payrolls and avoid late fees.
When you run a special payroll for bonuses, commissions, or off-cycle pay, 401(k) benefits apply the same way they do for regular payroll cycles. Each participant's existing contribution rate carries over to the special payroll automatically.
Note: To confirm whether the pay you're offering is considered compensation for 401(k) purposes, we recommend consulting with your tax advisor.
There is no way to set up a separate or one-time contribution rate for special pay. However, participants can change their contribution rate at any time before payroll runs. After the special payroll processes, they can sign back in and adjust their rate back to the regular amount.
Important: Contribution rate changes need to be made at least 24 hours before the payroll run. The rate selected applies to the entire amount paid in that payroll — if the special pay is included in the same payroll as regular pay, the rate applies to the total amount. Changes cannot be made retroactively.
If your company offers an employer contribution — like a match or non-elective contribution — those contributions also apply to special payroll runs.
How you report a special payroll depends on your payroll setup.
If you use Gusto or a Gusto Embedded provider (HiBob or HR for Health) for payroll, special payroll runs are automatically captured in real-time syncs. You do not need to report these payrolls in your Gusto 401(k) dashboard.
Learn more about running off-cycle payroll or bonuses with Gusto payroll.
If you have a self-service plan, report special payroll runs in the Payroll tab of your Gusto 401(k) administrator dashboard. When submitting your payroll report, select Add off-cycle payroll.
Find step-by-step directions for submitting payroll reports for self-service plans.
Plan sponsors and administrators cannot change contribution rates on behalf of participants. To check the rates your employees have elected, sign in to your Gusto 401(k) administrator dashboard and run a Deferral Rates Report.
Pro tip: For self-service plans, make sure the contribution rates your employees have elected in their Gusto 401(k) participant dashboard match the rates submitted to your payroll provider before running payroll.
Submit payroll reports as soon as possible. If you submit a payroll report late, you may need to pay lost earnings to employees and excise taxes to the Internal Revenue Service (IRS).