Cycle 3 Restatements: Here’s What You Need to Know

Posted on Sep 16, 2021

The Internal Revenue service requires all qualified retirement plans to update their plan documents every 6 years, in a formal process called a “plan restatement.” These  updates are intended to reflect legislative and regulatory changes that occurred since the last restatement. For defined contribution plans, the most recent restatement cycle (called Cycle 3) opened on August 1, 2020 and will close on July 31, 2022.

This is an important deadline because all plan documents must not only be restated by  and adopted by employers by July 31, 2022., but they must also certified by the IRS and adopted by employers. This deadline is mandatory. If missed, plans will be considered out of compliance and employers may face IRS penalties.

Plan sponsors should work with their third-party administrators to ensure that restated plan documents are compliant and include changes from all mandatory and voluntary amendments.  It’s also important to note that Cycle 3 plan documents must reflect legislative and regulatory changes that were enacted prior to February 1, 2017.

The timing of this cycle means that other more recent changes, such as the hardship distribution regulations effective in January 2019, the SECURE Act of 2019 and the CARES Act of 2020, will need to be addressed in separate, good-faith amendments which are called ‘snap-on amendments.’ These amendments are just summaries and during the next 6-year cycle, the plan restatement will need to incorporate the full text of these amendments.

The plan restatement cycle presents an opportunity for employers to review their plan documents and make changes as needed to other provisions. For example, if demographics, operations, or hiring strategies at the company have changed, it may be time to consider revising eligibility requirements or adding automatic enrollment, among other options that may increase the value of the plan to participants or make it operate more efficiently.

This material is provided for informational purposes only, and is not intended as authoritative guidance, legal advice, or assurance of compliance with state and federal regulations.