Form 5500 Can Be Skipped for Effective Year of Plans Adopted Retroactively

Section 201 of the Setting Every Community Up for Retirement Enhancement (SECURE) Act extended the deadline for employers to adopt new retirement plans that are effective for the preceding taxable year until the due date of the employer’s tax return for that year.

For example, a plan sponsor may adopt a new retirement plan by the due date, including extensions, for filing its tax return for 2021, but treat the plan as having been adopted as of the last day of 2020.

In an Employee Plans News bulletin, the IRS has addressed the Form 5500 filing for such plans for the year in which they are effective. The IRS says if an employer adopts a plan during its 2021 taxable year 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 for the plan year that begins during the employer’s 2020 taxable year.

The first Form 5500 required to be filed by such plans will be the 2021 Form 5500. However, the plan sponsor will be required to check a box on the form indicating that the it elects to treat the plan as retroactively adopted as of the last day of the employer’s 2020 taxable year. In addition, if the newly adopted plan is a defined benefit (DB) 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. Schedule SB documents the annual funding valuation results for single-employer DB plans so the IRS can be sure the pension plan made contributions in accordance with minimum funding requirements.

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.”

Instructions for the 2021 Form 5500 will further explain the filing requirements for plans adopted retroactively.