How to correct a late 401(k) deposit, end to end

Step 1: establish the facts, and stop the bleeding

List every affected pay date, the amount withheld, the date it actually reached the trust, and the earliest date it could reasonably have been segregated. That last date is the loss date the whole correction is computed from, and it is set by your own payroll history, not by a standard number of days. Fix the operational cause now, before correcting: a correction filed while the process still generates new delinquencies reopens the same item next year.

Step 2: deposit the principal and the lost earnings

The IRS states the corrective action in one line in its 401(k) Plan Fix-It Guide (page last reviewed or updated 16-Nov-2025):

“Determine which deposits were late and calculate the lost earnings necessary to correct. Deposit any missed elective deferrals, together with lost earnings, into the trust.”

Lost earnings are what the money would have earned in the plan between the loss date and the deposit. How you compute them depends on the path chosen in step 3. Under a full application to the DOL’s Voluntary Fiduciary Correction Program, the program text (90 FR 4192, January 15, 2025) lets a plan official either use EBSA’s Online Calculator at askebsa.dol.gov or perform a manual calculation under the program’s interest rules, which are built on the section 6621(a)(2) underpayment rates. Under the program’s Self-Correction Component the choice disappears:

“For purposes of calculating Lost Earnings and interest, if any, the self-corrector must use the Online Calculator described in paragraph (b)(8) below.”

Correcting entirely outside the program has no prescribed calculator. The benchmark that governs is the one in the Form 5330 instructions’ definition of correction (rev. December 2025): undoing the transaction to the extent possible, "but in any case placing the plan in a financial position not worse than that in which it would be if the disqualified person were acting under the highest fiduciary standards." An earnings estimate that lowballs the plan fails that test.

Step 3: choose the DOL path

Three options since the restated VFC Program took effect on March 17, 2025, all of them set by 90 FR 4192: a full VFCP application, which ends in a no-action letter; the Self-Correction Component (SCC), open only when lost earnings are $1,000 or less and the money reached the plan "within 180 calendar days from the date of withholding from participants' paychecks or receipt by the employer" (90 FR 4192); or correcting outside the program with no DOL paperwork and no DOL relief. The trade-offs between the three are their own page. What matters for the sequence: decide before computing earnings, because the SCC measures lost earnings from the date of withholding or receipt, an earlier start than the full application’s earliest-segregation date, and mandates the calculator.

Step 4: handle the excise tax

A late deposit held past the segregation date is a prohibited transaction under Code section 4975, and the section 4975(a) tax is reported on IRS Form 5330. Two mechanics from the Form 5330 instructions (rev. December 2025) that change the arithmetic: the amount involved for this failure "is based on interest on those elective deferrals", not on the deferrals themselves, and the 15% initial tax applies "for each year or part of a year in the taxable period", which ends only at correction. The return is due by the last day of the 7th month after the end of the employer’s tax year; the deadline mechanics, including the December 2025 switch of the extension form from Form 5558 to Form 8868, are on the due date page.

Whether you pay the IRS at all can depend on step 3. PTE 2002-51, amended alongside the program (90 FR 3667, January 15, 2025), exempts VFCP-corrected late deposits from the section 4975 sanctions when its conditions are met; SCC self-correctors instead pay the excise-tax-equivalent amount to the plan and keep Form 5330 documentation on file. Outside the program, the tax is due to the IRS with the return.

One boundary the instructions draw explicitly: "For purposes of section 4975, the term 'plan' does not include a section 403(b) tax-sheltered annuity plan." A late deposit to an ERISA 403(b) plan is still a fiduciary breach with the same deposit, earnings and Form 5500 consequences, and VFCP is still available, but there is no 4975 excise tax and no Form 5330 for it.

Step 5: report until the item actually closes

Schedule H line 4a keeps saying “Yes”, with the aggregate amount, through the correction. The 2024 Form 5500 instructions (read 2026-08-25) require the amount to be "carried over and reported again on line 4a" every year "until the year after the violation has been fully corrected", full correction meaning principal plus lost earnings. The attached schedule of delinquent participant contributions carries the amount through columns for contributions not corrected, corrected outside VFCP, pending correction in VFCP, and fully corrected under VFCP and PTE 2002-51, so the filing itself shows which step of this sequence the plan reached. A plan that deposited principal in March and earnings in June answers “Yes” for that whole plan year and stops only the year after.

Step 6: keep the file

Whichever path: the schedule of affected pay dates and amounts, the earnings calculation with its inputs, proof of the deposits, and the path-specific paper. For a full application, the no-action letter. For the SCC, the acknowledgment email, the completed retention record checklist, and the signed penalty-of-perjury statement the program requires. For PTE 2002-51 relief, the completed Form 5330 or equivalent documentation and proof of the payment to the plan. EBSA reserves the right to verify any of it; the file is what makes verification a formality. And because the prior years’ filings are public, the starting state of your own plan, which years said “Yes” and for how much, is checkable in a minute at planremit.com/check.

Sources

29 CFR 2510.3-102, eCFR, current through 2026-08-24, read 2026-08-25. IRS 401(k) Plan Fix-It Guide, elective deferral deposit page, last reviewed 16-Nov-2025, read 2026-08-25. Voluntary Fiduciary Correction Program, 90 FR 4192, January 15, 2025, effective March 17, 2025, read 2026-08-25. PTE 2002-51 as amended, 90 FR 3667, January 15, 2025, read 2026-08-25. Instructions for Form 5330, rev. December 2025, read 2026-08-25. 2024 Instructions for Form 5500, Schedule H line 4a, read 2026-08-25.