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IRS Third Cycle Restatement - Required IRS Restatement of Plan Documents

April 25, 2022

Since 2017, Congress and the IRS have enacted numerous laws and regulations affecting tax-qualified retirement plans. This means, among other things, that plan documents must be rewritten entirely, or "restated" as the IRS refers to this process. 

The IRS generally provide for a period of time after the effective date of new legislation and regulations for employers to restate their plan documents to conform to the new laws.  The legal deadline for restating your plan documents is fast approaching. 

All qualified plans are impacted by the new laws and must be restated. Your Plan will lose its tax-qualified status if you fail to make required plan amendments on a timely basis.

Because your company’s Plan is "qualified" under the Internal Revenue Code, special tax advantages apply, namely,

  • The employer is entitled to a deduction for contributions to the Plan;
  • Employees do not have to include in taxable income their share of contributions or income earned until they actually receive the funds;
  • The Plan's earnings are exempt from federal and state income tax; and,
  • Withdrawals from the Plan are subject to favorable income tax treatment.

However, with these tax benefits comes the burden of having to periodically incorporate new law changes into your Plan document. 

Required Action

The restatement must be completed before the end of the remedial amendment period, which is July 31, 2022.

If you have a “pre-approved” plan document (e.g., a volume submitter or prototype plan), the provider of the pre-approved plan document should contact you to complete the plan restatement.

Please keep in mind that complete restatement of plan documents is not an annually recurring event.  A plan restatement for a preapproved plan is something that is required only every 6 years.  The last time preapproved plan documents had to be fully restated to comply with new laws was 2016.

For more information, please contact our office at 877.273.8413 or info@definedplanadvisors.com.

 

Source: https://www.irs.gov/pub/irs-drop/a-20-07.pdf

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Kestra IS or Kestra AS are not affiliated with Defined Plan Advisors or Retirement Plan Advisory Group. Investor Disclosures: https://www.kestrafinancial.com/disclosures. ACR# 4267124 02/22