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Business owners looking to implement a new qualified retirement plan—like a §401(k) plan or a cash balance plan—for the 2016 calendar year must have the plan document signed by 12/31/2016 for the earliest allowable effective date of 01/01/2016. Here are some important points to consider about this deadline.

1. To enjoy tax benefits of a retirement plan, the plan must be “qualified.” A retirement plan is not a qualified plan unless it satisfies the qualification requirements stated in IRC §401(a). To implement the requirements of IRC §401(a), the regulations (Federal Regulation §1.401-1 and ERISA §402(a)(1)) stipulate that a qualified plan must be a definite written program. Such a written program is referred to by practitioners as the plan document—a formal, legal document that creates the plan provisions and the trust that custodies the plan’s assets.
2. A qualified retirement plan must be documented in writing. In order for the plan to exist, the plan document must be executed by the employer and the trustee(s) named therein. The timing of the document’s execution is critical:
   • If the employer’s fiscal year and the plan year are the same, the plan document must be signed on or before the last day of the plan/fiscal year, in order for the plan to be effective on first day of the plan/fiscal year, and for the employer to deduct contributions to the plan on the business’s tax return for the same year.
   • If the employer’s fiscal year and the plan year are not the same, the plan document must still be signed on or before the last day of the intended plan year. But the signature date’s proximity to the employer’s fiscal year-end will determine the fiscal year for which a tax deduction for the first year plan contribution can be taken (Rev. Rul. 81-114, Treas. Reg. §1.401(b)-1(a)). As an example, suppose the employer’s fiscal year is 07/01 to 06/30, and the plan year is 01/01 to 12/31 with an intended effective date of 01/01/2016. If the plan document was signed on or before 06/30/2016, then the 2016 plan contribution can—but is not required to—be tax-deducted for the fiscal year ending 06/30/2016. However, if the plan document was signed after 06/30/2016 (and before 12/31/2016), the employer must tax-deduct the 2016 plan contribution in the fiscal year ending 06/30/2017.
   • If the plan is a Safe Harbor 401(k) Plan (Treas. Reg. 1.401(k)-3(e)(2)), it must be in existence for at least three months in order to satisfy the Safe Harbor Requirements of IRC §401(k)(12). Using a calendar year plan as an example, this means that the plan document must be executed on or before 10/01, and that the participants must be allowed to make salary deferrals for the payroll period beginning on 10/01.
3. Plan documentation is an ongoing responsibility. The plan fiduciaries have a responsibility to ensure that the plan operates in accordance with the plan documentation and ERISA. The plan sponsor cannot completely delegate fiduciary responsibility, but can share responsibility with a co-fiduciary. The employer, retirement plan advisor and plan service providers should clearly delineate their respective roles and responsibilities, including who will oversee that plan changes are reflected in the plan documentation.