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Important Change to 2020 Form 5500 Filing Requirement: Retroactive Plan Adoption and First Form 5500

Earlier this month, the IRS announced a change regarding Form 5500 filing requirements, which benefit those plan sponsors who adopted a retirement plan after the close of the employer’s taxable year. This is because Section 201 of the SECURE Act permits those employers to treat the plan as having been adopted as of the last day of the employer’s taxable year (in essence, a retroactive plan adoption). This provision applies to plans adopted for taxable years ending December 31, 2019.

Regarding the filing requirements for Form 5500 and whether employers had to complete the form for the 2020 plan year, here is what the IRS has laid out:

“If an employer adopts a 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 plan as having been adopted as of the last day of the employer’s 2020 taxable year, then the plan sponsor will not be required to file a 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)”.

Instead, the first Form 5500 that must be filed with respect to that plan will be the 2021 Form 5500. The details are available in the August 6 issue of Employee Plans News.

What does this mean for plan sponsors?

  • Employers can still implement a plan up—legally retroactive for tax year 2020—until the September 15 deadline, without filing a first year Form 5500.
  • The first Form 5500 required to be filed (with respect to the plan) will be the 2021 Form 5500.
  • Employers using this strategy will check a box on the 2021 Form 5500 indicating they are electing to treat the plan as retroactively adopted as of the last day of their 2020 taxable year.
  • For defined benefit and cash balance plans that were adopted effective January 1, 2021, sponsors can wait until the 2021 plan year to file Form 5500.
    • Sponsors of defined benefit plans must attach a 2020 Schedule SB to the 2021 Form 5500 or Form 5500-SF, in addition to a 2021 Schedule SB. 
  • For calendar year plans, this year’s (2021) Form 5500 is due by July 31, 2022 (there are no extensions)

The IRS stated that it anticipates similar rules regarding retroactive plan adoption, pursuant to Section 201 of the SECURE Act after the employer’s 202t taxable year.

NOTE: minimum funding deadlines do not change, remaining at eight-and-a-half months after the end of the calendar year, even for defined benefit or cash balance plans that were adopted in 2021, retroactive to 2020. Therefore, all 2020 calendar year plans must complete their minimum required contributions by September 15, 2021.

We recognize that this sounds complicated but rest assured, the FuturePlan team is here to clarify this change for you, lay out plan options that benefit your business, and ensure that you always comply with filing deadlines. Contact me with any questions you have about this new IRS ruling at crosenberg@intacinc.com.



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