IRS Required Plan Restatements — Next Cycle Opens August 1

Every six years the IRS requires that all pre-approved “volume submitter” qualified retirement plans be completely amended and restated to comply with law changes to maintain their tax qualified status. IRS Announcement 2020-07 recently confirmed that the next required amendment and restatement cycle, referred to as “Cycle 3 DC”, for 401(k), profit sharing, and money purchase pension plans is scheduled to open as of August 1, 2020.

This means that every 401(k), profit sharing, and money purchase pension plan will need to be amended and restated during the two year period from August 1, 2020 to July 31, 2022. You should expect to hear from your document provider about this requirement and their process for completing the restatement. Aldrich Retirement Solutions clients will hear from us according to a schedule that will allow the completion of all required restatements on a timely basis. We expect to restate most of our clients’ plans during 2021.

Because of the timeline that the IRS uses to review and approve pre-approved plan documents, it is important to note that the Cycle 3 documents for all document providers will not reflect any legislative changes that have taken place since 2017. Therefore they will not include the recent changes to hardship withdrawals, the SECURE Act, or the CARES Act.

A plan sponsor may decide to utilize these provisions currently but the deadline to amend plans retroactively for these changes is as follows:

• Hardship Withdrawals: For pre-approved plans other than 403(b) plans, the applicable deadline is the employer plan sponsor’s tax filing deadline, plus extensions, for 2020.
• SECURE Act: Last Day of the Plan year beginning in 2022
• CARES Act: Last Day of the Plan Year beginning in 2022

Many of our clients have already amended their plans for the hardship withdrawal changes. For the SECURE Act and CARES Act provisions, most document providers will wait to add these amendments until the IRS provides model language for these changes.

Another issue to be aware of is the restatement requirement for a plan termination. When a plan is terminated, it must be updated with all required law changes. If a plan is terminated after August 1, 2020 the restatement will become a required part of the legal plan documentation required for the plan termination process.

As always, your Aldrich Retirement Solutions team is here to provide support for you however we can during these rapidly changing times. If you have questions about IRS Announcement 2020-07, please contact your advisor or Theresa Winkler. For more employer resources to help you navigate the developing impact of coronavirus on your business, visit our COVID-19 Resource Center.

This article is a summary of IRS required plan restatements and is provided as a service to our clients and friends. It should not be relied upon for tax advice.