On December 20, 2019, the Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law. The legislation made many significant retirement plan changes, including later deadlines for adopting a new 401(k) plan or amending a traditional 401(k) into a safe harbor plan. For most small businesses, these changes took effect January 1, 2020. 

Since the SECURE Act became law, we’ve received lots of questions from small business owners about the new 401(k) adoption deadlines. Below is a FAQ with answers to the most common questions – including major deadlines for 2020 and 2021. 

What is the deadline for adopting a new safe harbor 401(k) plan?

In general, the first year of a new safe harbor 401(k) plan must be at least 3 months long – to give all plan participants the opportunity to make salary deferrals. That means the deadline for employers to adopt a new calendar-based plan is October 1.

What is the deadline for adopting a new traditional 401(k) plan?

The SECURE Act extended the deadline for employers to adopt a new traditional 401(k) plan from the last day of the tax year until the due date of that year’s tax return (including extensions). That means the deadline for employers to adopt a new calendar-based plan will depend upon their tax status:

Tax Status

S-Corporation (or LLC taxed as S-Corp)

Partnership (or LLC taxed as a part)

C-Corporation (or LLC taxed as C-Corp)

Sole Proprietorship (or LLC taxed as sole prop)

While this change would not give employees more time to make salary deferrals, it would give employers more time to decide whether or not they want adopt a new 401(k) plan in order to make a year-end profit sharing contribution.

What is the deadline for amending a traditional 401(k) into a safe harbor plan?

A formal plan amendment must be adopted to convert a traditional 401(k) into a safe harbor plan. The deadline for adopting this amendment will depend upon the type of safe harbor contribution to be made.

When can I adopt a new 401(k) plan if I currently have a SIMPLE IRA in place?

All SIMPLE IRAs operate on a calendar year basis. Replacing one with a safe harbor or traditional 401(k) plan takes some planning due to the following IRS rules:

Due to these rules, the soonest you can implement a new 401(k) plan is the January 1 following the year your SIMPLE IRA is terminated

What are the major 401(k) adoption deadlines for 2020 and 2021?

Given the various 401(k) adoption deadlines, it can be easy to miss one. Seeing a timeline can help you avoid that. Below are the 2020 and 2021 deadlines for calendar-based plans.

2020 Plan Year

Deadline to adopt a safe harbor 401(k) plan for 2020. 

December 2, 2020

Deadline to adopt the amendment necessary to convert a traditional 401(k) plan into a 3% nonelective safe harbor plan for 2020.

March 15, 2021

Deadline for S-Corps and partnerships (or LLCs taxed as either) to adopt a traditional 401(k) plan for 2020 (assuming NO tax return extension is filed).

April 15, 2021

Deadline for C-Corps and sole proprietorships (or LLCs taxed as either) to adopt a traditional 401(k) plan for 2020 (assuming NO tax return extension is filed).

September 15, 2021

Deadline for S-Corps and partnerships (or LLCs taxed as either) to adopt a traditional 401(k) plan for 2020 (assuming a tax return extension is filed).

October 15, 2021

Deadline for C-Corps and sole proprietorships (or LLCs taxed as either) to adopt a traditional 401(k) plan for 2020 (assuming a tax return extension is filed).

December 31, 2021

Deadline to adopt the amendment necessary to convert a traditional 401(k) plan into a 4% nonelective safe harbor plan for 2020.

2021 Plan Year

Deadline to notify SIMPLE IRA participants their plan will terminate December 31 in order to adopt a new 401(k) plan for 2021.

December 2, 2020

Deadline to notify plan participants that a traditional 401(k) plan will be converted to a match-based safe harbor plan for 2021.

December 31, 2020

Deadline to adopt the amendment necessary to convert a traditional 401(k) plan to a match-based safe harbor plan for 2021.

October 1, 2021

Deadline to adopt a safe harbor 401(k) plan for 2021. 

December 2, 2021

Deadline to adopt the amendment necessary to convert a traditional 401(k) plan to a 3% nonelective safe harbor plan for 2021.

March 15, 2022

Deadline for S-Corps and partnerships (or LLCs taxed as either) to adopt a traditional 401(k) plan for 2021 (assuming NO tax return extension is filed).

April 15, 2022

Deadline for C-Corps and sole proprietorships (or LLCs taxed as either) to adopt a traditional 401(k) plan for 2021 (assuming NO tax return extension is filed).

September 15, 2022

Deadline for S-Corps and partnerships (or LLCs taxed as either) to adopt a traditional 401(k) plan for 2021 (assuming a tax return extension is filed).

October 15, 2022

Deadline for C-Corps and sole proprietorships (or LLCs taxed as either) to adopt a traditional 401(k) plan for 2021 (assuming a tax return extension is filed).

December 31, 2022

Deadline to adopt the amendment necessary to convert a traditional 401(k) plan into a 4% nonelective safe harbor plan for 2021.

Don’t miss out on the 401(k) you want! 

Safe harbor 401(k) plans are the most popular type of 401(k) used by small businesses today. However, they’re not the best option for every small business. Sometimes, a traditional 401(k) plan can do a better job meeting certain goals and budgets. If you’re a business owner, you owe it to yourself to make an informed choice

Understanding the 401(k) adoption deadlines can help you adopt your choice as soon as possible. 

This content was originally published here.

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