As has become usual practice, Congress passed some meaningful tax legislation as it recessed for the holidays.
In one of the new meaningful laws, enacted on December 20, 2019, you will find the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act).
The SECURE Act made many changes to how you save money for your retirement, how you use your money in retirement, and how you can better use your Section 529 plans.
Each week, I present one of the eight game changers of the SECURE Act. In week six, Congress allows businesses to open a retirement plan after year-end.
Under the SECURE Act, if you adopt a stock bonus, pension, profit-sharing, or annuity plan after the close of a tax year but before your tax return due date plus extensions, you can elect to treat the plan as if you adopted it on the last day of the tax year.
Under prior law, you had to establish the plan before the end of the tax year to make contributions for that tax year.
This change applies to plans adopted for tax years beginning after December 31, 2019.
How it works. You can establish and fund, for example, an individual 401(k) for a Schedule C business as late as October 15, 2021, and have the 401(k) in place for 2020.
Next Week: Expanded Tax-Free Section 529 Plan Distributions