Retirement plans stand out as one of the most valued offerings a company can provide. For small-to-mid-sized business owners, CFOs, controllers, and HR managers responsible for retirement plan oversight, understanding the critical deadlines associated with maintaining a compliant and efficient retirement plan is not just helpful; it is essential. Missing even a single deadline can lead to significant penalties, administrative burdens, and possible legal consequences. This article outlines the most important retirement plan deadlines that every business owner should be aware of, with insights on how to stay ahead of them to protect both the company and its employees.
The Plan Establishment Deadline: Timing is Everything
The first crucial deadline to note is the one associated with establishing a retirement plan. For businesses that want to take advantage of tax benefits for a given calendar year, the retirement plan must generally be established by the end of that tax year. However, under the SECURE Act, businesses now have until their tax filing deadline, including extensions, to establish a qualified retirement plan such as a SEP or a 401(k). This flexibility provides a strategic opportunity for business owners to retroactively set up a plan for the prior year while still claiming valuable tax deductions.
Still, waiting until the tax filing deadline to make this decision is risky. Administrative backlogs, document preparation issues, or delays in setting up trust accounts can create last-minute complications. For small-to-mid-sized business owners, CFOs, controllers, and HR managers responsible for retirement plan oversight, it’s best practice to start the conversation with plan advisors well before year-end. Early planning also allows for thoughtful consideration of plan design options, eligibility criteria, and funding mechanisms.
Annual Compliance Testing: Deadlines That Protect Plan Integrity
Every qualified retirement plan is subject to annual compliance testing to ensure that it does not disproportionately benefit highly compensated employees. These tests, which include Actual Deferral Percentage (ADP), Actual Contribution Percentage (ACP), and Top-Heavy tests, must be completed promptly after the end of the plan year. The Internal Revenue Service (IRS) generally expects corrective distributions or contributions to be made within two and a half months after the close of the plan year, typically by March 15 for calendar-year plans.
Failing to meet this March 15 deadline could expose the plan to costly penalties or even disqualification. Additionally, corrections made after this date may require additional excise taxes. For the professionals in charge of retirement plan oversight, timely coordination with third-party administrators (TPAs) and payroll providers is key to ensuring the plan remains in compliance. This process involves gathering accurate data on employee compensation, deferral rates, and employer contributions as soon as the plan year ends.
Form 5500 Filing: The July 31 Deadline (and Extensions)
One of the most significant annual reporting obligations for a retirement plan is filing Form 5500. This document provides information about the plan’s financial condition, investments, and operations and is used by both the IRS and the Department of Labor (DOL) to ensure regulatory compliance. The standard deadline for filing Form 5500 is July 31 for calendar-year plans. However, an automatic 2.5-month extension can be requested using Form 5558, which pushes the due date to October 15.
It is imperative that small-to-mid-sized business owners, CFOs, controllers, and HR managers responsible for retirement plan oversight mark this deadline in their calendars. Failure to file Form 5500 on time can result in steep daily penalties from the DOL and additional consequences from the IRS. Beyond compliance, timely filing demonstrates transparency and proper governance of the retirement plan, reinforcing employees’ trust in their employer’s commitment to their long-term financial well-being.
Required Minimum Distributions (RMDs): Ensuring Timely Payouts
Another often-overlooked but critical deadline involves Required Minimum Distributions (RMDs). Beginning at age 73 (for individuals turning 72 after January 1, 2023), participants in retirement plans must start taking minimum distributions each year. While this requirement primarily affects plan participants, it places a significant administrative burden on plan sponsors to identify eligible participants, calculate distribution amounts accurately, and issue payments on time.
The initial RMD must be made by April 1 of the year following the year in which the participant turns 73. Subsequent RMDs must be distributed by December 31 of each year. Mistakes in this area can lead to hefty penalties for participants and expose plan administrators to fiduciary risk. For business owners and their HR teams, working closely with plan recordkeepers and financial advisors ensures RMDs are managed properly and all necessary communications are handled in advance.
Plan Amendments and Document Updates: Staying Current with Legislative Changes
Retirement plans are governed by a complex and evolving regulatory framework, which means plan documents must be updated periodically to reflect new laws and regulations. Deadlines for required amendments can vary depending on the type of change and the nature of the plan. For example, discretionary amendments (changes the employer chooses to implement) typically must be adopted by the end of the plan year in which they become effective. On the other hand, required amendments (such as those prompted by the SECURE Act or CARES Act) often have separate deadlines set by the IRS.
Missing an amendment deadline can lead to plan disqualification or require participation in the IRS’s Voluntary Correction Program (VCP), which can be time-consuming and expensive. To avoid such outcomes, it’s essential for those overseeing retirement plans to maintain regular contact with their document providers and legal counsel. This ensures that any necessary updates are identified and implemented before the relevant deadlines, keeping the plan in good standing with regulators.
Conclusion
Retirement plan compliance is a dynamic and ongoing responsibility that extends far beyond the initial setup of the plan. For small-to-mid-sized business owners, CFOs, controllers, and HR managers responsible for retirement plan oversight, mastering the calendar of critical deadlines is essential for avoiding penalties, maintaining tax advantages, and upholding fiduciary duties. Each of the deadlines discussed, from establishing a plan and conducting compliance testing to filing Form 5500, processing RMDs, and implementing timely amendments, plays a vital role in sustaining the health and legality of the retirement plan.
Proactively managing these deadlines requires consistent collaboration with service providers, the use of reliable systems to track key dates, and a firm commitment to ongoing education. By staying vigilant and organized, business leaders can ensure their retirement plans serve their employees effectively while supporting the company’s financial and operational goals. Missing a deadline is more than a logistical oversight; it’s a risk to your organization’s reputation, employee trust, and regulatory standing. With the right planning and attention, those risks can be minimized, and the full value of the retirement plan can be realized.
Need Pension Consulting & Pension Plans in Phoenix, AZ?
Fiduciary Advisors, Ltd. is a business-to-business associated pension administrator based in Phoenix, Arizona, since 1990. We specialize in designing and planning employee retirement programs, pensions, profit sharing, and are third-party administrators for 401K for small- to medium-size businesses. We conduct enrollment meetings, prepare detailed actuarial calculations, cash-balance plans, and financial consultation for all businesses. Give us a call today for more information!