Every six years, the IRS requires pre-approved (formally known as prototype or volume-submitter) qualified retirement plan documents to be “restated” to update the document for previous IRS-required interim amendments and any other language the IRS chooses to include. There is no longer a requirement to periodically restate plan documents that are not pre-approved, known as individually designed documents, every five-years; however such documents must be amended to reflect new laws and regulations. This article will focus on the current six-year restatement “cycle” of pre-approved documents for qualified defined contribution plans (401(k), profit sharing, etc.). Please note that 403(b) plans are technically not included in this group and have their own six-year restatement cycle.
The IRS issued approval letters to the various defined contribution plan document providers during the summer of 2020, signaling the end of its approval process and the beginning of a new two-year restatement window, with the requirement that the plan documents be restated by July 31, 2022. This restatement cycle is referenced throughout the industry as a “Cycle 3” restatement. Items incorporated in this restatement include, but are not limited to, an updated definition of spouse, the ability to use forfeiture monies to offset additional types of employer contributions (such as safe harbor), the ability to amend a safe harbor plan mid-year and permitting in-plan Roth conversions.
If your defined contribution plan is currently on a pre-approved document, your provider should reach out to you soon, if not already. While July 31, 2022 may seem like a long way away, it will arrive more quickly than we think, and there are a lot of documents requiring restatement.
Now may be a good time to review your plan since it must be restated anyway. Are there provisions that are not working well that you would like to change or eliminate (to the extent permitted)? Does your plan provide for flexibility, where applicable, that may prove helpful in future years? Would you like to find ways to help improve non-discrimination testing? These are some of the discussion items to have with your document provider or consultant.
The restatement period is now upon us. Consider using this opportunity to find new ways to enhance your plan.
To learn more about plan document restatements and/or next steps, please visit www.cbiz.com/retirement
CBIZ Retirement Plan Services is a trade name under which certain subsidiaries of CBIZ, Inc. (NYSE Listed: CBZ) market investment advisory, investment management, third party administration, actuarial and other retirement plan services. Investment advisory and investment management services offered through CBIZ Investment Advisory Services, LLC, Registered Investment Adviser.Investments, investment advisory and investment management services may also be offered through CBIZ Financial Solutions, Inc., Member FINRA, SIPC and Registered Investment Adviser, dba CBIZ Retirement Plan Advisory Services.Third party administration, actuarial and other consulting services offered through CBIZ Benefits & Insurance Services, Inc.