Mary Beth’s Corner

Retroactive Profit Sharing Plan = Tax Deduction Time Machine

Tax Deduction Time Machine


Your time is money.. it’s not too late for you to keep more of it!

Although the primary goal within the retirement industry is to plan for the future, it can sometimes be beneficial to reach into the past..

Thanks to the SECURE Act of 2019, employers can retroactively implement a 401(k) or 403(b) plan and make profit sharing contributions for the previous year (but not payroll deferrals as participants must make deferral elections before earning amounts).

Before the SECURE Act, employers had to adopt a retirement plan before the end of their tax year in order to obtain the deduction for that year. 

Employers may now consider retroactively adopting a tax-qualified retirement plan such as a profit sharing plan, cash balance plan, or traditional defined benefit plan, for the purpose of making tax deductible employer contributions before their extended corporate tax filing deadline.

In other words, business owners who sponsor a retirement plan and want an additional tax deduction for 2022 can still adopt a plan and get a 2022 deduction. In order to get the deduction, the retroactive plan must be established and employer contributions funded prior to the corporate tax filing deadlines including any applicable extensions.

It doesn’t stop there..

New rules do not preclude an employer that currently maintains an employer-funded retirement plan for a respective tax year from retroactively adopting a new tax-qualified retirement plan. Alternative plan designs may be attainable by implementing a retroactive retirement plan for those employers that find their present plan provisions fail to meet their business goals and objectives.

My Benefits, LLC is committed to ensure your retirement plan is tailored to your business owner needs in offering a tax efficient approach. Let us save you time and money by designing a retirement that’s unique to fit you and your business.



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