By Edward “Ed” V. O’Neal, Senior Vice President and Manager, Retirement Plans
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Although we’re all acutely aware that the holiday season is coming, it always seems to “sneak up” on us year after year. Suddenly, it feels like we’re confronted with chores, including holiday season dinner preparation, gift shopping or maybe holiday season travel plans. And for business owners, the holiday season signals the need to review and discuss important deadlines and compliance requirements for existing retirement plans or establishing a new retirement program. Additionally, recent retirement plan regulations have created some helpful provisions to enhance retirement plan savings and plan participation levels.
Establishing a Retirement Plan for the 2025 Tax Year
While the deadline for establishing several plan types has already passed for 2025, such as SIMPLE IRAs and Safe Harbor 401(k)s, there are still multiple employer-sponsored retirement-plan types that could meet the needs of business owners. SEP IRAs continue to be a popular option for business owners interested in starting a retirement plan at or after 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.
Regulations have also now extended the plan establishment deadline for other retirement plan types to the business tax filing date, including extensions. So now qualified retirement plans like 401(k), profit sharing and defined benefit plans have the same plan establishment deadline flexibility previously enjoyed only by SEP IRAs. (Note: Plan establishment deadlines for plans like 401(k), profit sharing and defined benefit plans can vary by retirement plan provider. Check with your designated retirement plan provider to confirm specific plan establishment dates or deadlines for 2025 retirement plans.).
Recent legislation has introduced a host of new provisions designed to encourage business owners (particularly small business owners) to establish new retirement plans. For example, SECURE Act 2.0 included a new provision that permits self-employed business owners (e.g., sole proprietors or single member LLCs) establishing a solo 401(k) plan for 2025 until the due date of their 2025 business tax return to establish the plan, and provides any elective deferral and employer contributions. But be aware, this extended deadline for both elective deferral and employer contributions is only available for the first plan year of the solo 401(k) plan. After the initial plan year, elective deferral contributions must be made by year end, while employer contributions can be made through the business tax filing date, including extensions.
Retirement Plans for 2026
Although there are some limitations with still establishing retirement plans for the 2025 tax year, this is a great time for business owners to start exploring plan options for 2026. Plan alternatives can range from SEP IRAs and SIMPLE IRAs for business owners looking for cost-effective solutions, 401(k)s for those needing larger contribution levels and more plan features, or even defined benefit and cash balance plans for employers in search of unique design options. And for business owners with an existing retirement plan, recent regulation has made the past few years both hectic and exciting with the introduction of new plan features designed to enhance retirement savings and participation levels. New plan features include expanded catch-up contributions for employees aged 60-63, the ability to designate contributions to SIMPLEs as Roth contributions, and the requirement to include automatic enrollment and escalation provisions for certain 401(k) and 403(b) plans. The trend of introducing new retirement plan provisions created by recent regulations will continue in 2026.
As 2026 approaches, business owners will need to be aware of the important deadlines, compliance requirements and key retirement plan provisions created by regulation impacting retirement plans for 2025 and 2026. Business owners can contact their financial advisor to review potential retirement plan alternatives and the impact of recent retirement regulations. Business owners should always consult with their legal and tax advisors before establishing a retirement plan or making any changes to an existing 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.