Employers Not Required to File 2020 Return for Retroactively Adopted Retirement Plan

In the early fall of 2021, the IRS emailed employers a newsletter reminding them that they are not required to file a 2020 Form 5500 series return for retirement plans retroactively adopted in 2021. 

Section 201 of the Setting Every Community Up for Retirement Enhancement Act of 2019 (“SECURE Act”) permits employers to adopt a retirement plan after the close of its tax year and elect to treat that plan as having been adopted as of the last day of the prior tax year and, in effect, retroactively adopt a plan. Employers must retroactively adopt a plan by the due date for filing the prior year’s return. 

Typically, a retirement plan must file a Form 5500 series return every year to report specific plan information, as required by law. However, an employer is not required to file a 2020 Form 5500 series return for a retroactively adopted plan if the employer:

  • Adopts a plan during its 2021 tax year before the due date for filing the employer’s 2020 tax return; and
  • Elects to treat the plan as effectively adopted on the last day of the employer’s 2020 tax year.

Alternatively, employers will first file a 2021 Form 5500 series return on behalf of the plan. Employers will check a box on the 2021 Form 5500 series return to elect to treat the plan as a retroactively adopted plan as of the last day of the employer’s 2020 tax year.

Additionally, if the plan is a defined benefit plan, tax regulations require an employer to attach to their 2021 Form 5500 series return both a 2020 and a 2021 Schedule SB, Single-Employer Defined Benefit Plan Actuarial Information. The IRS newsletter also stated that the instructions for the 2021 Form 5500 will contain additional information about the filing requirements for plans adopted retroactively.

HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

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