Add Profit Sharing to Existing 401(k) Plan with SECURE Act Retroactive Amendment

I have a client that would like to make a profit sharing contribution by her 2021 extended tax filing deadline of 9/15/22 for the 2021 plan year.  We can get the calculation done, but, the existing 401(k) plan does not currently offer profit sharing.  Is it permitted under the SECURE Act to retroactively add a profit sharing feature to an existing 401(k) plan for a prior year?  This is not starting a brand new qualified plan (such as profit sharing or cash balance) retroactively (which is pretty clear in the SECURE Act as acceptable) but instead adding the profit sharing feature to an existing 401(k) plan.

As a side note, if it matters for context, this is a solo plan (husband and wife).

Thank you.

Can't do it. Create a new plan and merge them. Should have allowed PS in the 401(k) from the beginning.

If one does it as Bill Presson describes, is it feasible for the merger of the second plan with and into the first plan to happen immediately after creation of the second plan AND retroactive to January 1, 2022? If so, could one do all Form 5500 reporting solely on plan 001?

I would be interested in a way of doing a retroactive merger. I'm not aware that can work.

15 hours ago, Peter Gulia said:

If one does it as Bill Presson describes, is it feasible for the merger of the second plan with and into the first plan to happen immediately after creation of the second plan AND retroactive to January 1, 2022? If so, could one do all Form 5500 reporting solely on plan 001?

Outside of VCP (where just about anything is possible), I don't think it is possible.  

Peter, even if you established and merged plan 002 with plan 001 immediately and retroactively, why wouldn't a 5500 for 002 be necessary?  The financial reporting would be in plan 001, but you would still have to report participant counts and plan characteristics for plan 002 since they are eligible for the PSP at creation.  If we accept that creation of plan 002 created the eligibility for a PS contribution, that plan existed and must be reported.  Creative solutions to the retroactive merger aside, I don't see a way out of the reporting. 

My question was completely about my intellectual curiosity (recognizing my lack of experience with corrections).  Thank you for the education.

And in a fog yesterday, I missed that one wouldn’t assert the second plan as the source of the merged plan’s provision for nonelective contributions without reporting on that second plan.

14 minutes ago, Peter Gulia said:

My question was completely about my intellectual curiosity (recognizing my lack of experience with corrections).  Thank you for the education.

And in a fog yesterday, I missed that one wouldn’t assert the second plan as the source of the merged plan’s provision for nonelective contributions without reporting on that second plan.

Happy to help Peter.  Being curious in this industry gives you many rabbit holes to go down.

You might not need to file a 5500EZ for either plan if the combined assets are less than $250,000.  

1 hour ago, jsample said:

You might not need to file a 5500EZ for either plan if the combined assets are less than $250,000.  

They both will eventually.

Establish a new PS Plan retro for 2021.  You do not need to file 5500 for 2021 for that plan.  You will need to file a separate 5500 for that PS for 2022.  Merge existing 401(k) and newly established PS effective 12.31.2022.

when you do the merger effective 12.31.2022 merge "old" plan into the new one to address "permanency" issue (I am assuming "old plan" has been in existence for a while).

Thanks all, we figured the only solution was indeed starting a new plan and doing the merger and handling the reporting/filings for both plans.  I still don't understand why the SECURE Act wouldn't permit just retroactively amending the existing plan to add the feature.  We end in the same place, except the client wouldn't have all these filing and reporting requirements and steps (and, not to mention our associated fees) for now two plans between the two years. 

We come across quite a few plans, unfortunately, that we takeover to handle the work for the prior year that do not have a profit sharing feature that would otherwise benefit the client.

1 hour ago, RPP2001 said:

We come across quite a few plans, unfortunately, that we takeover to handle the work for the prior year that do not have a profit sharing feature that would otherwise benefit the client.

We can't set up all the new plans, so we're grateful for the silly people that screw things up and enable us to grow via takeovers.