The American Retirement Association’s staff and volunteer Legislative Retirement Committee (LRC) both review legislative proposals and proactively propose legislative changes to improve the employer-provided retirement system. Over a period of years, many of ARA’s proposals have appeared in proposed and enacted legislation. This month we want to highlight one of the proposals we are working on that has been included in the both the Family Savings Act of 2018 (H.R. 6757) and the Retirement Enhancement and Savings Act of 2018 (RESA) (H.R. 5282/S. 2526).
For several years, ARA has supported proposals to extend the due date for employers to adopt qualified plans from the end of the tax year to the extended tax filing deadline for the year. The LRC acknowledges that extending the deadline will require actuaries and TPAs to retool their workflows to deal with the extended deadline. However, extending the deadline to adopt a plan will increase the number of qualified plans and the number of Americans covered by a retirement plan. Many employers do not think about adopting a retirement plan until they finalize their tax for the preceding year. Under current law, the deadline to adopt a qualified plan has long passed at that point.
By allowing employers to adopt plans when they file their prior year income tax return, more employers will adopt plans because the deadline to adopt a plan will be at the same time as when employers are in the best position to assess their financial position and ability to fund a plan. This also coincides with when many employers are focused on finding additional tax deductions. The ARA believes this will be particularly true due to the tax law. Additionally, this proposal puts qualified plans on parity with SEP-IRAs, which can be adopted until the due date of the employer’s tax return. Lastly, we do believe this proposal will benefit members by increasing the number of qualified plans, including defined benefit plans, so it is a win-win!
For more information on ARA’s legislative proposals, please visit the ARA website at usaretirement.org and click on the ‘Retirement Issues’ tab, where you will find a link to our proposals document.
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