December 21: what can still be decided, and what cannot

Today is December 21, 2025. The year has ten days left after today. That number produces two opposite mistakes. One is the belief that every retirement decision dies on December 31. The other is the belief that anything not done can be repaired when the return is prepared. Both are wrong in a specific way. Some 2025 choices are already closed. Some are not due for months. A few are still alive this week, and they are not the ones a headline usually names. The work is to sort them before the holiday week sorts them for you.

Sterling Pension Group is a third-party administrator. We are not an actuarial firm. Independent Enrolled Actuaries certify the pension figures. We do not, and this briefing does not. Nothing here is tax, legal, or actuarial advice. It is a status check on a year that is almost over and a set of 2026 rules that are announced and still not in force.

What has already closed for most owners

Elective deferrals for 2025 are the clearest closed door. A deferral election generally has to be in place before the compensation is currently available. Wages already paid cannot be reclassified as deferred in the last ten days, and they cannot be reclassified next March when the deduction would have been convenient. If a final payroll has not yet been run, a timely election might still catch compensation that has not been paid. "Timely" is the 401(k) provider's procedure, not a verbal instruction to a bookkeeper on December 23. If the owner's 2025 W-2 is already fully paid, stop planning on a 2025 deferral. The limit you missed is $23,500, plus catch-up of $7,500 or, at ages 60 through 63, $11,250. Missing it does not increase next year's limit. The 2026 deferral limit of $24,500 and the 2026 ordinary catch-up of $8,000 start with 2026 wages. They do not backfill 2025.

A safe harbor match for the 2026 calendar year generally required notice 30 to 90 days before January 1. Counted back, the end of that window fell around December 2. Today is past that date. If the notice did not go out, do not invent a late notice and call the 2026 plan a match safe harbor. A nonelective safe harbor is a different rule. The advance notice requirement for nonelective safe harbor contributions was removed for plan years beginning after December 31, 2019, and a three percent nonelective can often be added by amendment as late as 30 days before the end of the plan year — for the 2026 year, that is a 2026 date, not a decision you must finish this week. A four percent nonelective can often be amended even later. Those paths have conditions. They are reasons to call the 401(k) provider, not reasons to announce to the CPA that safe harbor was "handled at year-end." The combo page describes the two-plan structure. It does not give notice for you.

The 2025 statutory limits are closed because the year of those limits is closing, not because you must wire money by Friday. Deferrals $23,500. Ordinary catch-up $7,500. Ages 60 through 63, $11,250. Defined contribution annual additions $70,000. Compensation cap $350,000. Defined benefit dollar limit $280,000. IRA limit $7,000. The source is IR-2024-285. You cannot elect into the 2026 table early because IR-2025-111 has been public since November 13. Notice 2025-67 is effective January 1, 2026. A December paycheck that withholds $24,500 of deferral room is a mistake, not a head start.

Accrued pension benefits are closed in a different sense. Once a pay credit has accrued under the document, an amendment generally cannot take it back. Anti-cutback rules protect the benefit already earned. If the 2025 formula was in the document all year, December 21 is not the day to decide the year was softer than you hoped and erase the credit. A prospective reduction, if the document and the notice rules allow one, had to be done before the accrual you wanted to avoid. For many calendar-year formulas, that moment is gone for 2025. The enrolled actuary can tell you whether any range remains inside the existing formula. You should not decide that a range remains because cash is tight.

What is still open, and for how long

Employer contributions are the category that confuses people who learned retirement plans from a 401(k) payroll deadline. A cash balance contribution is employer money. So is profit sharing. The deposit that supports a 2025 deduction generally has to be paid to the trust by the due date of the employer's return, including extensions. It does not, as a rule of deduction, have to clear on December 31. A partnership or S corporation that extends often has until September 15, 2026. A sole proprietor who extends often has until October 15, 2026. That is deduction timing. It is not permission to adopt a plan you have not designed, and it is not permission to skip minimum funding.

Minimum funding is its own statute. For a calendar-year defined benefit plan, the minimum required contribution for 2025 is generally due September 15, 2026. Some plans owe quarterly installments before that date. The actuary's valuation says which pattern applies. Missing the minimum can trigger an excise tax that starts at 10 percent of the unpaid amount, and a further tax if it stays unpaid. Extending the tax return does not extend that funding date. Paying in December because you want the cash out of the operating account is allowed if the plan and the deductible maximum support it. It is not required by the calendar on the wall this week. Publication 560 is the IRS overview to read with the CPA so the word "contribution" stops meaning three different deadlines.

Whether a new plan can still be adopted for 2025 depends on facts you cannot create in ten days. The law can treat a plan adopted by the filing deadline, including extensions, as adopted on the last day of the tax year. That rule is why someone will tell you at a dinner this week that December does not matter. Design still cannot start on the filing deadline, and it cannot honestly start on December 21 either if the census has never been gathered. A cash balance document needs an interest crediting rate, a formula, a trust, and a feasibility review an Enrolled Actuary can sign. A 401(k) feature added in the same breath cannot reach back for deferrals already missed. If the design work has been underway for weeks and the remaining issue is a signature, year-end still matters. If the design work has not started, the honest recommendation is to stop promising yourself a 2025 adoption and to use January for a 2026 plan that is built before the year is old. The page on when a plan is not a fit is the right tone for that decision. A late signature on a thin file is a worse fit than waiting.

Compensation can still move, and the movement matters. A bonus not yet paid, a distribution an S corporation owner was about to take in lieu of wages, a partner's guaranteed payment still to be determined: each one can change plan compensation if it is done as real compensation and not as a reclassifying journal entry after the fact. The cap for 2025 is $350,000. Paying more than that does not increase the pay the plan can count. Paying wages that were never wages, in order to create a credit, is a compensation problem the CPA will own. Tell the CPA before you run a December payroll you designed only for the pension.

What January will require, and what it will not repair

On January 1, 2026, the new limits come into force. Deferrals $24,500. Ordinary catch-up $8,000. Ages 60 through 63 still $11,250. Annual additions $72,000. Compensation cap $360,000. Defined benefit dollar limit $290,000. IRA limit $7,500, with an IRA catch-up of $1,100. The IRS COLA page is the table. None of those figures may be used to compute a 2025 credit or to judge a 2025 deferral. All of them should be in the first 2026 payroll file. Confirm the load date with the provider this week, while someone is still in the office.

The same morning, Roth catch-up treatment becomes operational for a participant whose 2025 FICA wages from the sponsoring employer were over $150,000. It affects the 401(k) catch-up. It does not affect the cash balance pay credit. If the document has no Roth feature and you are a W-2 owner over that wage line, your 2026 catch-up can be blocked until Roth exists. Partners and sole proprietors without FICA wages from the sponsor are often outside the rule. Ten days is a short time to add a feature, and it may already be too short at your provider. Ask anyway. Silence is how January payroll becomes a correction project. The benefit-limit overview on the IRS site remains the right explanation of why $290,000 is not the deposit that solves this: the defined benefit limits are annuity limits. They are not a Roth election and not a year-end wire.

Form 5500 does not come due because the calendar year ends. For a 2025 calendar-year plan, the return is generally due July 31, 2026, extended to October 15, 2026. The IRS Form 5500 corner and the Department of Labor's filing page are the references. Put the date on the deadline calendar. Do not spend December 21 hunting a filing that is not due. Do spend it confirming that a plan which already existed for 2024 did not leave last year's return unfinished. An open prior return is a worse holiday surprise than an unfunded December contribution you are allowed to make later.

PBGC coverage, if it applies, has its own premium calendar. Coverage is plan-specific. A professional-service employer with 25 or fewer active participants may be exempt. A plan covering only substantial owners may be exempt. A practice that added a partner, or that is not a professional-service employer in the statutory sense, may be covered even though a friend's practice is not. The PBGC coverage page is the starting point. Year-end does not answer it. The adoption file should already have asked it. If it has not, add it to the January list rather than guessing an exemption in order to make a December illustration look cleaner.

Staff facts lock as the year ends. Hours and compensation earned through December 31 are the 2025 testing facts. A termination in the last week can raise a partial-termination question if the group of departing participants is significant, and partial termination vests the people affected. Letting people go in order to improve a pension test is a bad fact pattern, not a technique. If headcount changed for ordinary business reasons, tell the administrator now so the census is not reconstructed from memory in March. Staff cost is a design input. It is not something you tune between Christmas and New Year.

What to do in the next two weeks

Make a one-page inventory, not a new plan design. Remaining 2025 payrolls, and whether a deferral election can still catch any unpaid compensation. The 2025 cash balance formula, if the plan exists, and whether any contribution range is still open inside that formula. The intended filing date for the employer return, including whether you will extend. The status of Roth in the 401(k) document. The date the provider will load 2026 limits. The trust account number, if a deposit might actually be made this month for cash-flow reasons rather than because Friday is a legal deadline.

If the inventory shows that design never started, do not start it on December 26. Use the ten days to collect the census you will need in January: entities, owners, compensation, hours, related businesses. If the inventory shows a plan in place and a CPA waiting on a range, ask for the preliminary minimum and maximum and label them preliminary. Keep every illustrative figure labeled illustrative. Then send the inventory to whoever is coordinating the pension and the 401(k), in one email, so the holiday replies are about facts. Two weeks from today is January 4, 2026. On that morning the new limits and the Roth catch-up rule will be in force. This week is the last week they are not.