By Edward “Ed” V. O’Neal, Senior Vice President and Manager, Retirement Plans
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As the year-end approaches, most folks are naturally thinking about their holiday to-do list, including gift shopping, preparing for the holiday dinner with family, or making plans for New Year’s Eve. But for business owners looking to establish a new retirement plan, understanding important deadlines and compliance requirements will be critical before focusing on holiday festivities.
Establishing a New Retirement Plan for the 2023 Tax Year
Although the deadline for establishing several plan types has already passed for 2023, such as SIMPLE IRAs and Safe Harbor 401(k)s, the SEP IRA continues to be a popular option for business owners creating a new retirement plan near or after the year end. SEP IRAs represent a simplistic and cost-effective plan solution that can be both established and funded through the business tax filing deadline, including extensions.
The Setting Every Community Up for Retirement Enhancement (SECURE) Act I (enacted in 2019) extended the deadline for establishing a qualified retirement plan to the business tax filing date, including extensions. This now provides qualified retirement plans like 401(k), profit sharing and defined benefit plans with the same flexible plan establishment deadline previously enjoyed only by SEP IRAs. (Note: Plan establishment deadlines can differ by retirement plan provider. Check with your designated retirement plan provider to confirm specific plan establishment dates/deadlines for 2023 retirement plans.)
Employer Retirement Plans for 2024
While there may be limitations on retirement plan options still available for 2023, now is a great time for business owners to start exploring plan options for 2024. With plan alternatives ranging from simplistic SEP IRAs and SIMPLE IRAs to the more complex 401(k) and defined benefit designs, business owners have the opportunity to select a retirement plan solution that meets their unique goals and objectives. Business owners can contact their financial advisor to discuss and review potential retirement plan alternatives available for 2024.
As 2024 quickly approaches, business owners will need to be aware of key deadlines and compliance requirements for establishing a new retirement plan for 2023 or 2024. Business owners should always consult with their legal and tax advisor before establishing a retirement plan.
IMPORTANT DISCLOSURES: The information provided is based on internal and external sources that are considered reliable; however, the accuracy of this information is not guaranteed. This piece is intended to provide accurate information regarding the subject matter discussed. It is made available with the understanding that Benjamin F. Edwards is not engaged in rendering legal, accounting or tax preparation services. Specific questions on taxes or legal matters as they relate to your individual situation should be directed to your tax or legal professional.