One of the requirements for maintaining a tax-qualified retirement plan is to update and restate plan document provisions for statutory and regulatory changes.  All 401(k) and other Defined Contribution Plan documents will need to be updated for what is known as the “Cycle 3” Restatement, which is underway now and will expire on July 31, 2022.  This mandatory requirement occurs every six years for plan sponsors who maintain their plans on a pre-approved plan document.  Plan documents are drafted based on laws and regulations set forth by Congress, the Treasury Department (IRS), and the Department of Labor.  As those laws and regulations change, documents must be updated to reflect those changes.  The deadline for the last mandatory restatement was April 30, 2016, but it was based on documents approved by the IRS in 2014 and only considered legislative/regulatory updates through 2010.  Since then, there have been a number of regulatory and legislative changes impacting retirement plans.

Every year since the last restatement, we have kept our client’s plan documents up-to-date with annual compliance amendments, as necessary.  However, even with the annual amendments each year, under IRS rules, pre-approved plan documents are required to be restated periodically to incorporate all changes into the body of the plan document itself, as well as a restatement of the Adoption Agreement.  To assist with the restatement process, the IRS issues a “Cumulative List of Changes,” instructing what must be included in the restated document. For this current cycle, the Cumulative List of Changes was issued in 2017.  This means that regulations concerning hardship distributions effective in January 2019, the SECURE Act, and CARES Act regulations still need to be addressed in separate, good-faith amendments and not in the plan documents.

The highlights of the 2017 Cumulative List that impact most defined contribution retirement plans include:

• New lifetime income offerings in Target Date retirement funds
• Allowable mid-year safe harbor modifications
• Ability to use forfeitures to fund safe harbor contributions
• Recognition of same-sex marriage partners who are married in states that authorize their union

What happens if you don’t timely amend?  Plans that are not timely amended will be required to go through a special IRS correction program to maintain their tax-qualified status.  It is critical to work with a retirement plan provider who will monitor & support the restatement requirements.