The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 and the Internal Revenue Service (IRS) have extended the deadline for employers to adopt new qualified retirement plans that are effective for the preceding taxable year until the due date of the employer’s tax return for that year (including extensions). This provision of the SECURE Act only applies to plans adopted for taxable years beginning after December 31, 2019.
This is a considerable change from the original IRS stance that employers had to adopt a plan before the end of its taxable year. This eliminates the time pressure for employers to decide if they can afford a new retirement plan. Now any plan that is adopted before the due date of an employer’s tax return (including extensions) is considered to have been established on the last day of the tax year.
Example: An employer who wishes to implement a plan for the calendar year 2021 may adopt a new retirement plan by the due date (including extensions) of the filing of its 2021 tax return, but the plan is treated as having been adopted as of the last day of 2021.
Please note that this new deadline is only for qualified plans that are employer-funded such as profit-sharing plans and cash balance plans. This does not include 401(k) deferral elections, since elective deferrals may not be implemented retroactively.
Filing Deadlines for Calendar Year Businesses
| Tax Status | Filing Deadline | Extended Deadline |
| S-Corporation (and LLCs taxed as) |
March 15th | September 15th |
| Partnership (and LLCs taxed as) |
March 15th | September 15th |
| C-Corporation | April 15th | October 15th |
| Sole Proprietorship | April 15th | October 15th |
Form 5500 Filing Requirement
In August of 2021, the IRS issued an Employee Plan News bulletin that states that retirement plans that are retroactively adopted can skip the first year’s Form 5500 filing requirement. Plans that are retroactively adopted become effective as of the last day of the first plan year, creating a one-day plan year that would normally require a Form 5500 filing. However, the IRS is allowing plan sponsors to file their first Form 5500 for the 2022 plan year, indicating on the filing by checking a box that the plan was retroactively adopted.
Benefits of Retroactive Plan Adoption
Not only does this new extension give employers additional flexibility but it also has other benefits:
- Allows an employer to adopt a retirement plan in the current year for the prior tax year, allowing a tax-deductible contribution
- Allows extra time for a company to decide if they can afford to retroactively adopt a new qualified plan
Implementing a new retirement plan has many benefits for a company and its employees. For employers, contributions are tax-deductible, assets in the plan grow tax-deferred, and retirement plans can attract and retain key employees.
If you have questions regarding retroactive plan adoption under the SECURE Act, contact your TRI-AD Client Service Manager.
TRI-AD and our Associates’ suggestions or recommendations shall not constitute legal advice. No content on our website can be construed as tax or legal advice and TRI-AD may not be considered your legal counsel or tax advisor. Clients are encouraged to consult with their tax advisor and/or attorney to determine their legal rights, responsibilities, and liabilities. This includes the interpretation of any statute or regulation, federal, state, or local; and/or its application to the clients’ business activities.