Deadlines for 401k Adoption – Including SECURE Act Changes Blog Feature
Eric Droblyen

By: Eric Droblyen on September 2nd, 2020

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Deadlines for 401k Adoption – Including SECURE Act Changes

Safe Harbor 401(k) | Retirement Planning | Plan Setup

On December 20, 2019, the Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law. The legislation made many significant retirement plan changes, including later deadlines for adopting a new 401(k) plan or amending a traditional 401(k) into a safe harbor plan. For most small businesses, these changes took effect January 1, 2020. 

Since the SECURE Act became law, we’ve received lots of questions from small business owners about the new 401(k) adoption deadlines. Below is a FAQ with answers to the most common questions – including major deadlines for 2020 and 2021. 

What is the deadline for adopting a new safe harbor 401(k) plan?

In general, the first year of a new safe harbor 401(k) plan must be at least 3 months long – to give all plan participants the opportunity to make salary deferrals. That means the deadline for employers to adopt a new calendar-based plan is October 1.

What is the deadline for adopting a new traditional 401(k) plan?

The SECURE Act extended the deadline for employers to adopt a new traditional 401(k) plan from the last day of the tax year until the due date of that year’s tax return (including extensions). That means the deadline for employers to adopt a new calendar-based plan will depend upon their tax status:

Tax Status

Filing Deadline

Extended Deadline

S-Corporation (or LLC taxed as S-Corp)

March 15

September 15

Partnership (or LLC taxed as a part)

March 15

September 15

C-Corporation (or LLC taxed as C-Corp)

April 15

October 15

Sole Proprietorship (or LLC taxed as sole prop)

April 15

October 15

While this change would not give employees more time to make salary deferrals, it would give employers more time to decide whether or not they want adopt a new 401(k) plan in order to make a year-end profit sharing contribution.

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What is the deadline for amending a traditional 401(k) into a safe harbor plan?

A formal plan amendment must be adopted to convert a traditional 401(k) into a safe harbor plan. The deadline for adopting this amendment will depend upon the type of safe harbor contribution to be made.

  • Safe harbor match amendment deadline is the last day of year preceding the plan year in which the plan will be safe harbor.
    • However, match-based safe harbor plans must distribute a safe harbor notice to participants sooner - 30-90 days before the start of the plan year. The SECURE Act eliminated the notice requirement for nonelective-based safe harbor plans. 
  • Safe harbor nonelective The SECURE Act made the amendment deadline much more flexible for these plans. It’s based on the nonelective contribution formula:
    • Less than 4% - up to 30 days before the close of the plan year in which the plan will be safe harbor.
    • 4% or greater - The last day of the plan year following the plan year in which the plan will be safe harbor (i.e., the deadline for distributing ADP/ACP corrective refunds).

When can I adopt a new 401(k) plan if I currently have a SIMPLE IRA in place?

All SIMPLE IRAs operate on a calendar year basis. Replacing one with a safe harbor or traditional 401(k) plan takes some planning due to the following IRS rules:

  • A SIMPLE IRA must be the sole retirement plan in effect for the calendar year.
  • SIMPLE IRAs can’t be terminated mid-year.
  • For a SIMPLE IRA to be terminated at year-end, participants must be notified at least 60 days in advance (November 2).

Due to these rules, the soonest you can implement a new 401(k) plan is the January 1 following the year your SIMPLE IRA is terminated

What are the major 401(k) adoption deadlines for 2020 and 2021?

Given the various 401(k) adoption deadlines, it can be easy to miss one. Seeing a timeline can help you avoid that. Below are the 2020 and 2021 deadlines for calendar-based plans.

2020 Plan Year

Date

New 401(k) Plan

Existing 401(k) Plan

October 1, 2020

Deadline to adopt a safe harbor 401(k) plan for 2020. 

 

December 2, 2020

 

Deadline to adopt the amendment necessary to convert a traditional 401(k) plan into a 3% nonelective safe harbor plan for 2020.

March 15, 2021

Deadline for S-Corps and partnerships (or LLCs taxed as either) to adopt a traditional 401(k) plan for 2020 (assuming NO tax return extension is filed).

 

April 15, 2021

Deadline for C-Corps and sole proprietorships (or LLCs taxed as either) to adopt a traditional 401(k) plan for 2020 (assuming NO tax return extension is filed).

 

September 15, 2021

Deadline for S-Corps and partnerships (or LLCs taxed as either) to adopt a traditional 401(k) plan for 2020 (assuming a tax return extension is filed).

 

October 15, 2021

Deadline for C-Corps and sole proprietorships (or LLCs taxed as either) to adopt a traditional 401(k) plan for 2020 (assuming a tax return extension is filed).

 

December 31, 2021

 

Deadline to adopt the amendment necessary to convert a traditional 401(k) plan into a 4% nonelective safe harbor plan for 2020.

2021 Plan Year

Date

New 401(k) Plan

Existing 401(k) Plan

November 2, 2020

Deadline to notify SIMPLE IRA participants their plan will terminate December 31 in order to adopt a new 401(k) plan for 2021.

 

December 2, 2020

 

Deadline to notify plan participants that a traditional 401(k) plan will be converted to a match-based safe harbor plan for 2021.

December 31, 2020

 

Deadline to adopt the amendment necessary to convert a traditional 401(k) plan to a match-based safe harbor plan for 2021.

October 1, 2021

Deadline to adopt a safe harbor 401(k) plan for 2021. 

 

December 2, 2021

 

Deadline to adopt the amendment necessary to convert a traditional 401(k) plan to a 3% nonelective safe harbor plan for 2021.

March 15, 2022

Deadline for S-Corps and partnerships (or LLCs taxed as either) to adopt a traditional 401(k) plan for 2021 (assuming NO tax return extension is filed).

 

April 15, 2022

Deadline for C-Corps and sole proprietorships (or LLCs taxed as either) to adopt a traditional 401(k) plan for 2021 (assuming NO tax return extension is filed).

 

September 15, 2022

Deadline for S-Corps and partnerships (or LLCs taxed as either) to adopt a traditional 401(k) plan for 2021 (assuming a tax return extension is filed).

 

October 15, 2022

Deadline for C-Corps and sole proprietorships (or LLCs taxed as either) to adopt a traditional 401(k) plan for 2021 (assuming a tax return extension is filed).

 

December 31, 2022

 

Deadline to adopt the amendment necessary to convert a traditional 401(k) plan into a 4% nonelective safe harbor plan for 2021.

Don’t miss out on the 401(k) you want! 

Safe harbor 401(k) plans are the most popular type of 401(k) used by small businesses today. However, they’re not the best option for every small business. Sometimes, a traditional 401(k) plan can do a better job meeting certain goals and budgets. If you’re a business owner, you owe it to yourself to make an informed choice

Understanding the 401(k) adoption deadlines can help you adopt your choice as soon as possible. 

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About Eric Droblyen

Eric Droblyen began his career as an ERISA compliance specialist with Charles Schwab in the mid-1990s. His keen grasp on 401k plan administration and compliance matters has made Eric a sought after speaker. He has delivered presentations at a number of events, including the American Society of Pension Professionals and Actuaries (ASPPA) Annual Conference. As President and CEO of Employee Fiduciary, Eric is responsible for all aspects of the company’s operations and service delivery.

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