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Deadlines for 401(k) Adoption – Including SECURE 2.0 Changes

Deadlines for 401(k) Adoption – Including SECURE 2.0 Changes

February 02, 2024

The SECURE Act of 2019 (SECURE) and SECURE Act of 2022 (SECURE 2.0) made sweeping changes to 401(k) plans – particularly plans sponsored by small businesses. Among the changes are more flexible deadlines for adopting a new 401(k) plan or amending a traditional plan into a safe harbor plan. All of these deadlines are available to employers today.

We receive lots of questions from small business owners about the adoption deadlines for 401(k) plans. Below is a FAQ with answers to the most common questions – including a summary of the major deadlines for 2024 and 2025. The deadlines reflect the changes made by SECURE and SECURE 2.0.

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

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?

SECURE 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 the year’s tax return (including extensions). The tax status of the employer will dictate the adoption deadline:

Tax Status

Adoption Deadline

Extended Deadline

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

March 15

September 15

Partnership (or LLC taxed as a partnership)

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

For example, an LLC taxed as a partnership can adopt a new 401(k) plan for 2023 as late as September 15, 2024 if their 2023 tax return was extended by March 15, 2024. The retroactive effective date won’t allow employees to make salary deferrals for 2023, but it will allow the employer to allocate a 2023 profit sharing contribution to eligible employees.

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

Converting a traditional 401(k) into a safe harbor plan requires a formal plan amendment. The amendment deadline will depend upon the safe harbor contribution to be made by the employer.

    • 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. SECURE eliminated the safe harbor notice requirement for nonelective-based plans.
    • Safe harbor nonelective  SECURE made the amendment deadline more flexible. The deadline now depends upon the amount of the nonelective contribution:
      • 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).

How soon can I replace a SIMPLE IRA with a 401(k) plan?

All SIMPLE IRAs operate on a calendar basis. Further, a SIMPLE IRA must be the sole retirement plan maintained by an employer.  Prior to SECURE 2.0, an employer could only terminate a SIMPLE IRA on December 31. Now, employers have the option to terminate a SIMPLE IRA at any time during the year if certain conditions are met.

Below are the rules for replacing a SIMPLE IRA with a 401(k) plan. They vary based on the SIMPLE IRA’s termination date:

    • December 31 termination date – The employer can start a new 401(k) plan on the January 1 following the year in which the SIMPLE IRA is terminated if the following requirements are met:
      • Participants must be notified at least 60 days in advance of the termination date (i.e., November 2).
      • Contributions to the SIMPLE IRA must stop as of the termination date.
    • Mid-year termination date – The employer must start a safe harbor 401(k) plan “as of the day after” the SIMPLE IRA’s termination date. The following requirements must also be met:
      • Participants must be notified at least 30 days in advance of the termination date.
      • Contributions to the SIMPLE IRA must stop as of the termination date.
      • The elective deferrals made to the safe harbor 401(k) plan cannot exceed a weighted limit based on the number of days the SIMPLE IRA and safe harbor plans were in effect for the year.
      • The safe harbor notice must disclose the weighted limit to participants.

What are the major 401(k) adoption deadlines for 2024 and 2025?

Given the various 401(k) adoption deadlines, it can be easy to miss one. Seeing a timeline can help you avoid that. Below is a summary of the deadlines for 2024 and 2025 assuming a calendar-based plan.

2024 Calendar Year

Date

New 401(k) Plan

Existing 401(k) Plan

March 15, 2024

Deadline for S-Corps and partnerships (or LLCs taxed as either) to adopt a traditional 401(k) plan for 2023 (assuming NO tax return extension is filed).

 

April 15, 2024

Deadline for C-Corps and sole proprietorships (or LLCs taxed as either) to adopt a traditional 401(k) plan for 2023 (assuming NO tax return extension is filed).

 

September 15, 2024

Deadline for S-Corps and partnerships (or LLCs taxed as either) to adopt a traditional 401(k) plan for 2023 (assuming a tax return extension is filed).

 

October 1, 2024

Deadline to adopt a safe harbor 401(k) plan for 2024.

 

October 15, 2024

Deadline for C-Corps and sole proprietorships (or LLCs taxed as either) to adopt a traditional 401(k) plan for 2023 (assuming a tax return extension is filed).

 

November 2, 2024

Deadline to notify SIMPLE IRA participants their plan will terminate on December 31 to adopt a new 401(k) plan on January 1, 2025.

 

December 2, 2024

 

Deadline to adopt the amendment necessary to convert a traditional 401(k) plan into a 3% nonelective safe harbor plan for 2024.

December 2, 2024

 

Deadline to notify 401(k) participants that a traditional plan will be converted to a match-based safe harbor plan for 2025.

December 31, 2024

 

Deadline to adopt the amendment necessary to convert a traditional 401(k) plan into a 4% nonelective safe harbor plan for 2023.

2025 Calendar Year

Date

New 401(k) Plan

Existing 401(k) Plan

March 15, 2025

Deadline for S-Corps and partnerships (or LLCs taxed as either) to adopt a traditional 401(k) plan for 2024 (assuming NO tax return extension is filed).

 

April 15, 2025

Deadline for C-Corps and sole proprietorships (or LLCs taxed as either) to adopt a traditional 401(k) plan for 2024 (assuming NO tax return extension is filed).

 

September 15, 2025

Deadline for S-Corps and partnerships (or LLCs taxed as either) to adopt a traditional 401(k) plan for 2024 (assuming a tax return extension is filed).

 

October 1, 2025

Deadline to adopt a safe harbor 401(k) plan for 2025.

 

October 15, 2025

Deadline for C-Corps and sole proprietorships (or LLCs taxed as either) to adopt a traditional 401(k) plan for 2024 (assuming a tax return extension is filed).

 

November 2, 2025

Deadline to notify SIMPLE IRA participants their plan will terminate on December 31 to adopt a new 401(k) plan on January 1, 2026.

 

December 2, 2025

 

 

Deadline to adopt the amendment necessary to convert a traditional 401(k) plan to a 3% nonelective safe harbor plan for 2025.

December 2, 2025

 

Deadline to notify 401(k) participants that a traditional plan will be converted to a match-based safe harbor plan for 2026.

December 31, 2025

 

Deadline to adopt the amendment necessary to convert a traditional 401(k) plan into a 4% nonelective safe harbor plan for 2024.

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.