Insights

SECURE Act Extends Deadline for Adopting
New Retirement Plans to Filing Date of Returns

In order for companies to take a deduction for contributions to a retirement plan, the plan would have to have been established by December 31st of the year of the deduction.  Often times, you don’t know your tax position until after the end of the year. Prior to the SECURE Act, by that time it was too late to adopt a new plan to generate tax-deductible contributions.

The SECURE Act extended the deadline for adopting a new plan for a taxable year to the filing date (with extensions) of your income tax return for that year. The new plan must be established, implemented and funded by this deadline. The deadline would be March 15th or April 15th (depending on the type of entity) for calendar year filers that do not go on extension. The deadline moves to September 15th or October 15th (depending on the type of entity) with a timely-filed extension. However, in the case of a defined benefit plan (including a cash balance plan), the deadline cannot be pushed past September 15th, regardless of the tax filing deadline. Note that a 401(k) elective deferral feature generally cannot be added retroactively after the end of the year.

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The information presented here should not be construed as legal, tax, accounting, or valuation advice. No one should act on such information without appropriate professional advice and after a thorough examination of the particular situation.