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New single member 401(k) for 2020, Still time?


K-t-F
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I know that the Secure Act says that a PS or DB plan can  be adopted for the previous year up to the time the plan sponsor files their taxes.  That December 31 deadline date scramble is no longer for them.  The act did not change the 401(k) rule that says you need to give the NHCEs time to defer for that initial year.  But what if it is a single member plan, a sole proprietor?  Could they adopt a plan now for 2020 and still make deferral contributions in addition to a non elective contribution?  

Its not easy being green

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If it ever becomes law, section 320 of the Securing a Strong Retirement Act would permit exactly this. However the fact that it is a provision in a new bill is a clear indication that it is not permissible under current law.

https://www.congress.gov/bill/117th-congress/house-bill/2954/text?s=1#toc-H1C6C2AD2785149CFA7E8B441E3DC0C7E

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Since a sole proprietor's income isn't known until their tax return is completed, they are not required to deposit their deferrals until their income is known. However they are still required to make an election to defer before the end of the plan year.

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Well, be a little careful here. IMHO, you cannot make a valid election to defer to a plan that doesn't exist. So merely signing a deferral election in December would not allow you to retroactively adopt a 401(k) the following year and deposit deferrals for that prior year.

Others may have a different opinion on this.

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