IRS Eliminates 2020 Form 5500 Filing Requirement for Certain Retroactively Adopted Retirement Plans

The IRS has announced that certain retirement plans adopted retroactively for the 2020 taxable year will not be required to file Form 5500 for 2020. For plans adopted for taxable years beginning after December 31, 2019, the SECURE Act permits employers to elect to treat a plan adopted after the close of a taxable year as if it had been adopted on the last day of the taxable year, provided the plan is adopted by the due date (including extensions) of the employer’s tax return for that year (see our Checkpoint article). According to the announcement, if an employer timely adopts a plan during the 2021 taxable year and elects to treat the plan as having been adopted as of the last day of the 2020 taxable year, the first Form 5500 required to be filed for the plan will be the 2021 Form 5500. On that Form 5500, a box will need to be checked indicating that the employer is electing to treat the plan as retroactively adopted. The IRS anticipates that similar rules will apply for plans retroactively adopted after the 2021 taxable year.

EBIA Comment: This is welcome news for sponsors who used the SECURE Act provision to adopt a profit-sharing or defined benefit plan retroactively for 2020. But it is inapplicable to plans that were 401(k) plans in 2020 because elective deferrals may not be implemented retroactively. The IRS takes the position that a 401(k) plan must be formally adopted and in effect before elective deferrals may begin. For more information, see EBIA’s 401(k) Plans manual at Section XXVII.B.3 (“Timing for Adopting Plan and Establishing Trust”).

Contributing Editors: EBIA Staff.