The “Setting Every Community Up for Retirement Enhancement” Act (SECURE Act) was signed into law on December 20th, 2019. Besides having an impact or retirement savings accounts, this Act also makes a number of changes to employer sponsored plans. They generally simplify administration, but not only. Let’s take a look how you can benefit from this.
Employers Can Now Treat Qualified Plans Adopted by Filing Due Date as Effective on Close of the Tax Year
This means that under the SECURE Act you can set up a qualified plan for your employees in March and still take a back dated deduction for the previous tax year. If you applied for an extension, then this date is moved even further. In any case, the latest the adoption of the plan must occur no later than with the filing of Form 5500 and Schedules. This date is generally September 15th of the following year.
Simplification of The 401(k) Safe Harbor
As of December 31st, 2019, the SECURE Act releases you the employer from the requirement of notifying your employees pursuant to Treasury Regulations §1.401(k)-3(d) and §1.401(m)-3(e). This impacts safe harbor qualified non-elective contributions. However, you still need to provide the notice if you are making a matching contribution. And also the employees get to keep their opportunity to make or change their elective deferral once in each plan year.
Furthermore, you as the employer can elect to retroactively amend a plan to be a safe harbor plan. But, for such a case, you must make this election at least 30 days before the end of the plan year.. You can also amend a 401(k) plan to be a safe harbor plan. You must make this move by the following plan year-end. However, in such a case the safe harbor contribution becomes 4%, not 3%.
SECURE Act Impact
The SECURE Act did implement major changes and introduced a vast number of simplifications for you. We’re trying to keep this introduction as short as possible. But, if this is something you wish to explore further, then we have specialists ready to meet with you.