Qualified retirement plans—including profit sharing, money purchase, and 401(k) plans—receive special tax benefits by meeting requirements set forth by the IRS and Department of Labor. Many of these plans operate under a pre-approved plan document that is recertified by the IRS every six years. What were formerly called “Prototype Plans”, the IRS requires Pre-Approved Documents to be restated on a uniform six year cycle. A new six-year cycle, called Cycle 3, has begun. The restatement period runs from August 1, 2020 through July 31, 2022. The six-year restatement cycle helps to keep plans from becoming too burdened with separate interim “good faith” amendments that may have been added to the plan document over many years of operation. Restatement provides a great opportunity to implement discretionary changes in addition to updating your plan document with mandatory legislative updates. During restatement, our dedicated Plan Consultants can help evaluate potential enhancements and ways to optimize your retirement plan. Why Cycle 3? This is the third six-year cycle for which the IRS has issued opinion letters under the Pre-Approved Retirement Plan Program. Cycle 1 was the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) restatement in 2010. Cycle 2 was the Pension Protection Act (PPA) restatement in 2016. Although this Cycle 3 restatement does not have an ornate title, it is equally important to maintain the qualification of the plan.
Since the announcement of the Cycle 3 Restatement period, Congress has enacted a number of new laws affecting tax qualified retirement plans, specifically the Setting Every Community Up for Retirement Enhancement (SECURE) Act and the Coronavirus, Aid, Relief and Economic Security (CARES) Act. In addition, the IRS has issued substantial guidance regarding the operation of qualified plans under these laws. Congress and IRS have generally permitted employers to comply with these new rules in operation without formally amending the underlying Plan document until some date after the law is effective. The Cycle 3 Restatement does not include these changes; however, the general consensus is that the plan must be amended to conform by the end of the first Plan Year beginning after December 31, 2021. If you are currently on our Pre-Approved Plan Document or if we restate your document during the Cycle 3 Restatement period, we will prepare the amendment for employer signature once we receive the required amendment language. If not, please forward a copy of the Cycle 3 Restatement and any subsequent amendments you obtain from your current provider as soon as they are received.
What Do I Need to Do? EJReynolds has acquired the Opinion Letters from the IRS on our Pre-Approved Documents for the Cycle 3 Restatement Period, and we are ready to begin the restatement process for our clients currently on our document. If you are not currently on our Pre-Approved Plan Document, contact your Plan Consultant to receive a quote on converting. We will be reaching out to you in the coming months and through 2021 to make the process of restating your plan documents as seamless as possible. Be on the lookout for updates. We will be sending you reminders and instructions to keep you current in future blogs on the EJReynolds, Inc. website to guide you through the restatement process.