A recent brief from Detroit-based law firm Kerr Russell reminds that the deadline for signing the third (Cycle 3 Restatement) or “Post PPA” cyclical amendments for retirement plan documents is fast approaching.
Retirement plan documents are legal documents that outline a plan’s provisions and the regulatory requirements for the plan, and most qualified plans use what is known as a “preapproved” plan document that the IRS has reviewed and approved for use.
The IRS has separate cycles for defined contribution plans, defined benefit plans, and 403b plans. The restatement window for defined contribution plans opened on August 1, 2020, and is referred to as the “Cycle 3 restatement” or the “post-PPA restatement.”
The restatement process allows the document language to be updated for legislative changes and amendments that occurred since the last document was written.
COVID-19 has brought many changes to retirement plan laws. In addition, plan documents are still being updated for pre-COVID 19 laws such as the 2019 SECURE Act.
The brief notes that back in the days of the Economic Growth and Tax Relief Reconciliation Act (EGTRRA), the IRS adopted a system of cyclical amendments to manage the process of updating retirement plans for changing laws. Most employers last “restated” their plan documents in 2016, and preapproved plan documents are required to be rewritten, approved by the IRS and adopted by plan sponsors every six years.
Per the brief: The third or “Post PPA” restatement cycle is winding up and plan sponsors are required to sign updated documents by July 31, 2022. While that date may seem far off, consider the fact that the date represents the tail end of the most recent “cycle” in play since 2016. Of course, many laws have changed since then and many of those changes will be added to the new documents as interim “tack-on” amendments.
Some employers have not adopted the “hardship” amendment due by year end 2021. Now is a good time for employers to review their plans, adopt required updates and make other changes if appropriate. By taking the time now, employers have the time to understand and be thoughtful about decisions affecting their business and their employees in retirement.
Restatement fees charged by 401k providers range from around $500 to $2,000. Plan sponsors can get as much “bang for their buck” as possible by wrapping both required and any discretionary amendments they wish to adopt (which would otherwise trigger an additional fee) into the restatement.
Again, the deadline for plans to be restated under Cycle 3 is July 31, 2022. Missing the post-PPA restatement deadline could lead to steep IRS penalties for plan sponsors, including possible plan disqualification.
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
