SECURE Act: Plan Adopted by Filing Due Date for Year May Be Treated as In Effect as of Close of Year (Section 201)

The SECURE Act contains a provision that grants employers additional time to adopt a qualified retirement plan. Under current law, in order to make tax-deductible contributions to a retirement plan for a taxable year, an employer must formally adopt the plan no later than the last day of that taxable year. Section 201 of the SECURE Act provides that a retirement plan may be treated as if it is effective for a taxable year so long as the plan is adopted before the due date of the employer’s tax return (including extensions) for that year.

The new provision applies to plans adopted after December 31, 2019.  It grants employers additional time to establish a qualified plan and gives employees the opportunity to receive contributions for that taxable year. The provision will benefit both employers looking to establish a qualified retirement plan and employees looking to save for their retirement. For example, if an employer finds itself with extra cash in April 2021 after the books are closed for the 2020 fiscal year, the new provision would allow the employer to establish a retirement plan and make a tax-deductible contribution that relates back to 2020.

Interested in learning more about the SECURE Act? Download the SECURE Act eBook from the Schneider Downs Retirement Solutions team for a full overview of provisions and highlights at www.schneiderdowns.com/secure-act-ebook.

Schneider Downs Wealth Management Advisors, LP (SDWMA) is a registered investment adviser with the U.S. Securities and Exchange Commission (SEC).  SDWMA provides fee-based investment management services and financial planning services, along with fee-based retirement advisory and consulting services.  Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2021 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

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