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IRS: Plans Retroactively Adopted After the End of the Plan Year Have No 2020 Form 5500 Filing Requirement

Practice Management

The Internal Revenue Service has announced a significant update with regard to Form 5500 filing requirements.  

Section 201 of the Setting Every Community Up for Retirement Enhancement (SECURE) Act 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—a provision that applies to plans adopted for taxable years beginning after Dec. 31, 2019. 

Employers began utilizing this provision in significant numbers beginning earlier this year (following the close of their 2020 taxable years). However, it was unclear whether and how those employers should complete Forms 5500 for the 2020 plan year. ASPPA’s Government Affairs Committee raised this issue with the IRS and DOL, noting the need for guidance.

In the August 6 issue of Employee Plans News, the IRS answered the call. The IRS explains that if a plan sponsor 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, it 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. (The references to Form 5500 include the Form 5500-SF and Form 5500-EZ unless otherwise noted.) 

Instead, the IRS notes, the first Form 5500 required to be filed with respect to the plan will be the 2021 Form 5500. 

The IRS goes on to explain that the plan sponsor will be required to check a box on the 2021 Form 5500 indicating that it elects to treat the plan as retroactively adopted as of the last day of its 2020 taxable year. Additionally, if the plan is a defined benefit plan, the employer will be required to attach a 2020 Schedule SB to the 2021 Form 5500 or Form 5500-SF, in addition to a 2021 Schedule SB. 

The IRS says it anticipates that “similar rules will apply to the retroactive adoption of a plan pursuant to section 201 of the SECURE Act after an employer’s 2021 taxable year,” and notes that the instructions for the 2021 Form 5500 will further explain the filing requirements for plans adopted retroactively.

All comments
Melissa Rebello
9 months 3 weeks ago
What about if the Form 5558 was already filed? This guidance came after the 7/31 deadline!
Kelsey Mayo
9 months 1 week ago
That's a great question. Filing the Form 5558 should not change the fact that the Form 5500 is not required. It might generate a letter if a Form 5500 is not ultimately filed, which might be responded to with an explanation that the Form 5500 was not required. Alternatively, one might just file the Form 5500, even though not required, to avoid that potential.
Kelsey Mayo
9 months 1 week ago
We are requesting additional guidance from the DOL to confirm that since the SAR is summarizing the annual report (Form 5500), a SAR cannot be owed for a year in which a Form 5500 isn't owed.