Chances are that if you have a 401(k) or profit sharing retirement plan, the document is on an IRS pre-approved form. One of the “costs” of having a pre-approved plan is that it must be re-stated every six years onto an updated pre-approved document that incorporates recent changes in the law. For defined contribution plans, such as 401(k) plans, the current restatement deadline is July 31, 2022, just a few short months from now.
A restatement is generally not something that can be done in a week or two, and vendors are under a great amount of stress trying to get all of their clients restated by this looming deadline. This is why it is so important that the restatement process be started as soon as possible. If your plan has not already been restated, get it done as soon as possible. Keep in mind that the process has many steps. For example, a typical restatement will have the following steps:
- Plan Changes and Compliance Issues. Assess whether any design changes are desired at this time. This requires that the employer refresh its memory as to what the current plan document provides. Sometimes there are surprises. Plan document compliance (for example have all discretionary and required interim amendments been adopted timely in the past?) should be assessed at this point in the process as well.
- Draft Restatement. Get the document vendor to restate the plan document on the new form of pre-approved document. This can take a while as there may be a lot of plans ahead of you in line and a single deadline.
- Careful Review. The employer, and ideally benefits counsel, should review the draft restatement carefully to make sure that the correct provisions have been accurately carried over from the current document and that all amendments and desired changes to the current document are reflected in the draft. This may involve some back-and-forth with the document vendor, who may not be able to be very responsive, depending on their work load.
- Adoption of Restatement. Once a final version of the restatement is produced, it will need to be adopted, requiring applicable approval by the board or a committee in addition to actual execution by an authorized representative of the employer. Make sure all necessary documents are signed, dated, and kept in the plan’s records. Don’t throw away the current plan document! All signed and dated documents will be needed forever (at least while the plan exists)to demonstrate that they were timely and effectively adopted.
- Interim Amendments. Be aware that interim amendments for the SECURE Act and the CARES Act must be adopted by the end of 2022. Because these amendments came out after the pre-approved document was reviewed by the IRS, they are not incorporated into the pre-approved document, and may or may not be included in the restatement package. The important thing is to have them on your radar and make sure that they are adopted this year. The required interim amendment for the Final Hardship Distribution Regulations is also a stand-alone amendment that should have been adopted by the end of 2021, and may be re-adopted as part of the restatement package.
- New Services Agreement. If the document vendor is requiring a new services agreement be entered into at the same time as the restatement, this document will need to also be carefully reviewed by the employer and legal counsel.
- Corrections. Once the restatement has been timely adopted (e.g., on or before July 31, 2022), correction of any failures discovered in the restatement process —such as plan document or operational failures—should be corrected under IRS guidelines. While this step is not subject to a specific deadline, the sooner the better is always the “deadline” for corrections.
As you can see, the process is not a simple one and there are a lot of steps and people to coordinate. The bottom line is make sure you know where you are in the process right now and make sure that it gets completed well before the July 31, 2022 deadline.