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What 401K Plan Sponsors Need To Know About

What 401K Plan Sponsors Need To Know About

August 04, 2021

One of the most recent changes in 401(k) plans now requires that certain plan provisions need to be included in your plan document. The existing IRS timeline requires a PPA restatement, which is where plan documents are to be restated every six years.

Recently, however, the IRS added a new restatement called “Cycle 3”. The deadline for these changes is July 31, 2022 and many plans sponsors I’ve talked to are unaware of this critical filing date.

This is a deadline you do not want to ignore because doing so can lead to IRS penalties and could include plan disqualification.

The “CYCLE 3” Restatement should include the following:

• The definition of “spouse” to include the same gender
• Allowance of plan forfeitures to offset company contributions
• Allow in-plan rollovers
• Allow 401(k) plans the ability to amend Safe Harbor plans mid-year
• The documents that are restated Adoption Agreement, Plan Document
• The participant notices to the employees

Considering this deadline requires the following changes in your plan documents, now is it an ideal time to review your plan provisions and make sure they align with your business goals, and objectives as well as helping your employees utilize the benefit to become Retirement-Ready.

Also, I included a list of IRS plan document amendments and restatements.

  1. Cycle 3 Restatement
    Due Date July 31,2022
    Qualified Full plan restatement

  2. Cares Act Amendment
    Due Date December 31, 2022
    Expanded distribution options and loans
    Postponement of loan payments
    NO RMD’s requirement for 2020

  3. Secure Act Amendment
    Due Date December 31st, 2022
    Increasing Required Minimum Distribution Age
    Distributions without penalties birth, adoption, pooled employer plans

  4. Hardship Distribution Amendment Due Date December 31,2021
    This Amendment is required for all plans that have hardships distributions and more.

If you haven’t updated your plan documents - Here is the site that can help.

Unsure what this means for your plan? Feel free to reach out to me for help. You may qualify for a free Plan Design assessment.