Retirement Plan Restatement

Every six years the Internal Revenue Service (IRS) requires certain qualified retirement plans to be fully amended and restated to comply with law changes. The Cycle 3 Defined Contribution (DC) Plan Restatement period began on August 1, 2020, and plan sponsors of defined contributions plans (401(k), profit-sharing, and money purchase pension plans) will have until July 31, 2022, to comply. Plans that do not restate their plan document by this date will be subject to IRS-imposed penalties, which, in extreme cases, could jeopardize the plan’s tax-qualified status.

So why is this important? Plan documents are the framework that an individual retirement plan must follow. They are drafted based on laws and regulations set forth by three federal regulators: Congress, the Treasury Department (IRS), and the Department of Labor (DOL). The IRS is the main overseer, and it has the ability to “pre-approve” plan documents. All qualified retirement plans that use an IRS-pre-approved plan document must be restated. A restatement is a complete re-writing of the plan document. It incorporates changes from any mandatory or voluntary amendments that may have been adopted since the last time the document was re-written. Oftentimes a plan may make amendments such as altering eligibility requirements, changing vesting schedules, or adding a new contribution source like Roth or profit-sharing. Those changes are voluntary and can be done at any time. Plan restatements are mandatory and must be done within the two-year IRS-mandated window.

The IRS recognizes that plans cannot be amended every time there is a regulation change, otherwise plans would continuously be amending plan documents. Therefore, it created these cycles when plans simply adopt so-called “good-faith” or “snap-on” amendments that address the new laws instead of going through a full restatement. At the end of every given cycle, the plan document is re-written to incorporate the full text of the language that the good-faith amendments summarize.

The Cycle 3 DC Plan Restatement is the current mandatory restatement period because it is the third required restatement that follows this six-year cycle. This restatement incorporates most changes made since the last mandatory restatement was finalized in April 2016. It is important to note that the IRS approval letters for Cycle 3 plan documents only consider legislative and regulatory changes enacted prior to February 1, 2017. That means the following changes will still have to be addressed in the separate, good-faith amendments rather than in the plan documents:

  • Hardship distributions regulations (effective January 2019)
  • SECURE Act (passed in December 2019), and 
  • CARES Act (passed in March 2020)

Many plans have already been amended for the Hardship distribution regulations, so they will not be required to adopt that amendment again. The summary amendment language is still being made available for the SECURE and CARES Acts, so please contact your plan provider for guidance. 

The restatement period is also a great time to review any plan design changes. Your plan provider can go over any plan changes and features with you. If you are a plan sponsor or plan participant and your 401(k) is not with Heartland Trust Company, give us a call or send us an email and we would be happy to go over your plan’s design.


Jana Samek, Relationship Manager – Retirement ServicesRetirement Plan Restatement

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