Some guidance on retroactive plans

One of the most annoying parts of being an ERISA attorney was the requirement that new retirement plans be adopted by the last day of the Plan Year, making December 31st a very busy time of year.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act changed that by allowing an employer to adopt a retirement plan after the close of the employer’s taxable year by the due date, including extensions, for filing its tax return for the taxable year,  treating the plan as having been adopted as of the last day of the taxable year.

The Internal Revenue Service (IRS) just provided guidance that if a plan sponsor adopts a plan during the employer’s 2021 taxable year (not later than the due date, including extensions, for filing the employer’s 2020 tax return) for the 2020 taxable year, it won’t be required to file a Form 5500 for 2020. The first Form 5500 required to be filed with respect to the plan will be the 2021 Form 5500.

A plan sponsor will have to to check a box on the 2021 Form 5500 indicating that it elects to treat the plan as retroactively adopted as of the last day of its 2020 taxable year. However, if the plan is a defined benefit plan, the employer will have to attach a 2020 Schedule SB to the 2021 Form 5500 or Form 5500-SF, in addition to a 2021 Schedule SB.


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