Mandatory Plan Document Restatements

Qualified retirement plans must operate in accordance with their plan documents. Ongoing legal and regulatory changes in retirement plan rules frequently require plan sponsors to amend and restate their plans to keep their documents compliant with the IRS.

As a result, there are frequent changes in the laws and regulations that require changes to plan documents. In most cases, these changes are not major ones and can be handled by “snap-on” or interim amendments. Periodically, however, the plan must be rewritten in its entirety because of the number and complexity of the changes which is referred to as a “Restatement”.

The IRS requires that pre-approved plans must be rewritten, reviewed and approved by the IRS, approximately once every six years to conform with tax law changes.

It’s important that you understand why your plan document must be restated. What follows is a non-technical explanation in Question and Answer format.

Restatement Q & A

  • Why do I need to keep amending my plan?

    Qualified plans are governed by a set of Federal laws enacted by Congress and regulated by various agencies. The IRS is responsible for oversight of the tax aspects of retirement plans, and the DOL is responsible for reporting, disclosure and fiduciary aspects of retirement plans. The result is a continual change in the laws due to changing legislation and regulations issued to oversee compliance with the laws. As a result, there are frequent changes in the law but in most cases they are not major ones. A requirement to have a qualified retirement plan is that it must be in writing. This means that as the laws change, your plan must generally be amended to reflect the changes.

  • When must our plan be restated?

    For Defined Contribution Plans (401(k)/Profit Sharing/Money Purchase), the IRS has tentatively set January 31, 2023, as the deadline for the next restatement.  We anticipate the restatement widow to open sometime in 2020 or 2021.

    403(b) Plans must be restated by March 31, 2020, and Defined Benefit/Cash Balance Plans must be restated by April 30, 2020. The IRS has tentatively set 2025 as the next following restatement deadline for 403(b) Plans and Defined Benefit/Cash Balance Plans.

    As the IRS issues approval to TRA to begin using the updated pre-approved document, we will contact you with more details on the process for restating your plan.

  • What does the restatement consist of?

    Once the plan has been reviewed, additional requested changes have been made (if any) and the restated documents are drafted, they should be reviewed carefully. The final signature-ready documents will consist of the following:

    1. A restated Plan Document or Adoption Agreement;
    2. A resolution adopting the restated document; and
    3. A restated Summary Plan Description for distribution to all participants and beneficiaries.
  • Are there any special considerations when replacing one plan document with another?

    Special care must be taken to ensure that certain benefits called “protected benefits” are not unintentionally eliminated or reduced. Protected benefits include forms of distributions such as lump sums and annuities and timing of distributions such as an early retirement provision.

  • What does it cost for the plan restatement?

    For plans that utilize TRA’s pre-approved documents, the cost depends on several factors, including, but not limited to:

    • Timely receipt of affirmative authorization to restate
    • The extent of the mandatory, regulatory changes
    • Participation in TRA’s optional Plan Document Maintenance Program (PDMP)
  • What happens if I fail to amend or restate my plan on a timely basis?

    The IRS can disqualify the plan if the restatement deadline is not met.  When a plan is disqualified, all of the taxable benefits to the Plan Sponsor and Participants are lost.  Contributions might not be deductible, and employees cannot defer taxes on contributions.

    Plan Sponsors who do not restate their plans in a timely manner may incur additional expenses to correct the failure though an IRS Voluntary Correction Program filing.

    This is why restating  plans on a timely basis is critical.

Conclusion

It is the responsibility of the plan fiduciary to ensure that the plan is updated and signed in a timely manner. Because the restatement process can be time consuming it is important that this task is included in the planning process to ensure restatement deadlines are met.

To contact your Client Relationship Manager, click here.

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