K-t-F Posted August 19, 2021 Share Posted August 19, 2021 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 Link to comment Share on other sites More sharing options...
Bill Presson Posted August 19, 2021 Share Posted August 19, 2021 No. Can't defer on money already earned and their comp was considered earned on 12/31. William C. Presson, ERPA, QPA, QKA bill.presson@gmail.com C 205.994.4070 Link to comment Share on other sites More sharing options...
C. B. Zeller Posted August 19, 2021 Share Posted August 19, 2021 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 Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance. Corey B. Zeller, MSEA, CPC, QPA, QKA Preferred Pension Planning Corp.corey@pppc.co Link to comment Share on other sites More sharing options...
K-t-F Posted August 19, 2021 Author Share Posted August 19, 2021 Ok.. my mistake. I recall reading that single member sole proprietors have until 4/15 of the following year to adopt and fund a 401(k) for the previous year. No? Its not easy being green Link to comment Share on other sites More sharing options...
C. B. Zeller Posted August 19, 2021 Share Posted August 19, 2021 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. Catch22PGM 1 Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance. Corey B. Zeller, MSEA, CPC, QPA, QKA Preferred Pension Planning Corp.corey@pppc.co Link to comment Share on other sites More sharing options...
Jakyasar Posted August 19, 2021 Share Posted August 19, 2021 No as 401k election had to be made by 12/31/2020. No issue with ps or db plan though. Link to comment Share on other sites More sharing options...
K-t-F Posted August 19, 2021 Author Share Posted August 19, 2021 Ok... got it... it's all about the "election" to defer that needs to be by December 31. Thanks Its not easy being green Link to comment Share on other sites More sharing options...
Belgarath Posted August 20, 2021 Share Posted August 20, 2021 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. Catch22PGM 1 Link to comment Share on other sites More sharing options...
Ilene Ferenczy Posted August 20, 2021 Share Posted August 20, 2021 You cannot make a deferral election until the plan is established . See Treas. Reg. 1.401(k)-1(a)(3)(iii)(A). Catch22PGM 1 Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now