Plan sponsors across the country are preparing for the Cycle 3 restatement set forth by the IRS. A restatement is a rewrite of retirement plan documents to include recent legislative and regulatory changes that occurred since the last restatement. The IRS requires employers to restate their retirement preapproved plan documents every 6 years.
Stay Compliant with our Fiduciary and Plan Sponsor Checklist
Cycle 3 Restatement Timeline
The Cycle 3 restatement for preapproved IRS documents began on August 1, 2020 and closes on July 31, 2022. Previous restatements occurred in 2010 following the Economic Growth and Tax Relief Reconciliation Act and the Pension Protection Act of 2016. This restatement cycle will look at post PPA legislative changes.
Please note that If your organization plans on terminating its plan before July 31, 2022, the documents will also need to be restated at the time of termination.
What Plans are Affected?
This restatement cycle includes all preapproved plan documents for profit sharing, 401(k), and money purchase plans. Church 401(k) plans and some ESOP plans may also be able to participate for the first time during this cycle. If you are currently using an individually designed plan, you may also opt-in.
How to Prepare for the Cycle 3 Restatement
During the 18-month period, plan sponsors can begin preparing compliance obligations based on policy changes and necessary updates. Since this cycle occurs during a period of change in federal regulations and laws governing retirement plan, plan sponsors should also understand that recent law and regulation changes may still not be incorporated in this restatement. Provisions related to new rules formulated by laws such as the SECURE and CARES Act will be reflected in Cycle 4. Plan sponsors can begin working now to assess the following within their plan:
- Does the current plan design correlate with the employer’s HR and financial objectives? If your organization has experienced changes in ownership, economic outlook and workforce since the 2016 restatement period, this should be assessed.
- Does the plan document feature best practices to diminish liability risks associated with the administration of an ERISA-governed plan? During Cycle 3, your plan should include a statute of limitations on claims and a plan-friendly forum clause.
- Do the Cycle 3 restatement changes in the IRS’s preapproved document program match the plan’s established administrative and fiduciary structure? If your PPA restatement documents contain trust and asset custody provisions, they will need to be separated during this cycle.
Need Assistance? We Can Help
When it comes to restatements, it can be confusing due to the technicalities, deadlines and numerous documents. Our team at California Pensions will discuss your plan design, structure, best practices and reduce overall risk for your organization. If you have any questions or need assistance – please contact us today!
