Plans Retroactively Adopted After the End of the Plan Year Will Not Be Required To File a 2020 Form 5500

August 10, 2021

By Peter Alwardt

Background

Section 201 of the Setting Every Community Up for Retirement Enhancement (“SECURE”) Act of 2019 permits 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) and elect to treat the plan as having been adopted as of the last day of the taxable year. This provision applies to plans adopted for taxable years beginning after December 31, 2019.

Announcement

In its August 6 issue of Employee Benefit Plan News, the IRS explained that if an employer

  • adopts a retirement plan during the employer’s 2021 taxable year (but not later than the due date, including extensions, for filing the employer’s 2020 tax return), and
  • elects to treat the retirement plan as having been adopted as of the last day of the employer’s 2020 taxable year,

then the employer/plan sponsor will not be required to file a 2020 Form 5500 with respect to the plan for the plan year that begins during the employer’s 2020 taxable year (references to Form 5500 include the Form 5500-SF and Form 5500-EZ unless otherwise noted).

Rather, the first Form 5500 required to be filed with respect to the retirement plan will be the 2021 Form 5500.  However, the plan sponsor will be required to check a box on the 2021 Form 5500 indicating that the employer elects to treat the plan as retroactively adopted as of the last day of the employer’s 2020 taxable year.

Additionally, if the retirement plan is a defined benefit plan, the employer/plan sponsor will be required to attach a 2020 Schedule SB (schedule to report the plan’s funded status) to the 2021 Form 5500 or Form 5500-SF, in addition to a 2021 Schedule SB. IRS noted that the instructions for the 2021 Form 5500 will further explain the filing requirements for plans adopted retroactively and that “similar rules will apply to the retroactive adoption of a retirement plan pursuant to section 201 of the SECURE Act after an employer’s 2021 taxable year.”

About Peter Alwardt

Peter Alwardt is a Tax Partner specializing in employee benefits, tax and ERISA issues for domestic and international clients. He is a member of the American Institute of Certified Public Accountants and NY State Society of CPAs.