Annual Testing Process Overview (For Advisors)

Compliance Testing

The IRS requires retirement plans to pass a series of mathematical tests each year to show that retirement plan benefits were provided in a non-discriminatory manner and that the plan operated in accordance with the plan document. We refer to this process as ‘Annual Testing’.

During “Annual Testing”, Vestwell reviews your plan’s activity, and contributions and gathers company information as well as employee demographics. This data allows us to complete testing and provide your plan with a compliance package as well as any requested contribution calculations.

Once all is completed, Vestwell prepares your plans' Form 5500, a retirement plan informational filing required to be submitted to the IRS annually.

Click here in order to learn more about the types of tests run and the classification of employees.

In order to make the Annual Testing process go smoothly, there are a few things that your plan sponsor(s) can do to prepare:

  • Review payrolls – log into their sponsor(employer) portal check the Contributions or Payrolls tab, and submit outstanding payrolls that may have been missed
  • Review deferrals – log into their sponsor(employer) portal and compare the reports from the Reports tab to the deferral reports from their payroll system to ensure the deferral records match
  • Consult your tax advisor/financial advisor about additional contributions – determine whether it’s advantageous for your business to make additional contributions, like profit-sharing contributions. 

The year-end process typically begins in January for a calendar year-end plan and could extend up to the first or second 5500 filing deadline.

To learn more about the specifics of the Year-End-Process and Timeline, please click here or watch the video below.

Government Reporting 

Along with the required compliance testing that plans need to be done, another important factor in operating a plan is that the financials and operations of the plan need to be reported to government entities to maintain the compliance status of the plan. Failure to report or file can result in a plan incurring heavy financial penalties and potentially being disqualified from operating entirely.

To learn more about Government Reporting, please click here

If you have any questions about the process, you can reach us any time at