In this overview, we’ll explore the basics of defined benefit plans, what it means to adopt a plan, and the deadline for adoption. A defined benefit plan is a retirement plan that provides a fixed payment to the employee upon retirement. The amount of the payment is typically based on factors such as the employee’s salary and years of service.
Is there a deadline to set up a defined benefit plan?
For an S corporation with a calendar year, the deadline to set up and fund the plan is March 15th, with a six-month extension to file until September 15th. However, it’s important to note that for practical purposes, the plan may need to be adopted well in advance of that deadline to ensure adequate time for set up and funding.
In addition to setting up the plan, there are other deadlines to be aware of with a Defined Benefit Plan. Timely contributions must be made to the plan, and the appropriate government forms must be filed before their due dates.
What is the deadline to fund the Defined Benefit Plan
The deadline to fund a Defined Benefit Plan is the earlier of the due date for the company’s tax return, including extensions or Sept 15th (9.5 months after the end of the plan year).
For example, if a company has a calendar tax year, the deadline to fund the Defined Benefit Plan for the 2023 tax year would be the same as the tax return filing deadline, which is generally April 15th, 2024, or Sept 15th, 2024 if an extension is requested.
What does it mean to adopt a plan?
Adopting a plan means finalizing and signing the plan document that will list all the rules and regulations surrounding the defined benefit plan.
The rules for a defined benefit plan document are governed by ERISA and the IRC, which provide guidelines for the plan’s design, funding, and operation, as well as the rights and responsibilities of participants and fiduciaries.
A defined benefit plan document will typically have the following sections:
– A benefit formula that calculates the retirement benefit based on factors such as salary, years of service, and age at retirement.
– A vesting requirement that specifies when an employee is entitled to receive the retirement benefit.
– A funding method and schedule that details how contributions will be made by the employer and/or employees.
– A plan administration section outlining the responsibilities of plan administrators, trustees, and other fiduciaries in managing the plan assets and ensuring compliance with regulations.
