Q&A About Plan Restatements

Helpful information about what restatements are and how they apply to your retirement plan.

What is a plan restatement?

A restatement is a complete rewriting of the plan document. It incorporates changes from any mandatory or voluntary amendments that may have been adopted since the last time the document was rewritten.

Is the current plan restatement mandatory?

Yes, plans that do not adopt a restated plan document by July 31, 2022 will be subject to IRS-imposed penalties, which in extreme circumstances, could include revocation of the plan’s tax-favored status.

Which types of plans must be restated?

All qualified retirement plans that use an IRS-pre-approved plan document must be restated approximately every six years; however, there are various cycles depending on plan type. For example, 401(k) and profit sharing plans, defined benefit plans, and 403(b) plans each have a different six-year restatement cycle. This upcoming restatement period for 401(k) and profit sharing plans is referred to as “Cycle 3” because it is the third required restatement that follows this six-year cycle.

What is an IRS pre-approved plan?

The IRS reviews and approves prototype plan document language ahead of a restatement cycle and issues an opinion or advisory letter as evidence of the pre-approved status. All employers who adopt a pre-approved plan document may rely on that approval rather than being subject to an individual determination letter. Pre-approved plans are typically more cost-effective than individually designed plans.

Why do we have to restate our plan?

As the laws and regulations set forth by Congress, the Treasury Department (IRS), and the Department of Labor change, plan documents are required to be updated to reflect those changes. The plan restatement ensures that your plan remains compliant with any new laws or regulations that were enacted since the last restatement cycle.

Do we already have amendments addressing these changes?

Yes, the IRS recognizes that if plans had to be restated every time a regulation changes, we would be continuously rewriting plan documents. Thus, they created these six-year cycles during which plans adopt amendments addressing new laws instead of going through a full restatement; however, at the end of a given cycle, the plan document is rewritten to incorporate the full text of the language that these amendments summarized.

We just restated our plan. Do we really have to do it again?

Yes, even if you recently restated your plan, the pre-approved language was from the previous restatement cycle, and therefore, it did not satisfy the new requirements. To ensure compliance, your document has to reflect the newest document language.

Our plan is brand new, do we need a new plan document already?

If your plan document was established prior to the restatement language being finalized and available, then yes, you still must restate your plan.

Does this restatement mean we don't have to do any additional amendments in the future?

No, the IRS approval letters for Cycle 3 plan documents only consider legislative and regulatory changes enacted prior to February 1, 2017, so many of the recent regulation changes must still be implemented via additional plan amendments. (Note: some amendments below may have already been completed for your plan.)

  • Hardship distributions regulations (effective January 2019)
  • SECURE Act (passed in December 2019)
  • CARES Act (passed in March 2020)
As a plan sponsor, do I have to spend a lot of time on this restatement process?

The Alliance team will do the heavy lifting for you, and if there are no design changes to be made, then your primary responsibility will be to review and sign the documents upon completion. However, if you wish to consider changes, such as eligibility or employer contributions, that will require additional consulting and coordination with your team to ensure that all desired changes are properly implemented.