What is a plan restatement?
A plan restatement is a complete rewriting of your plan to incorporate legislative and employer elected amendments since the plan was last rewritten.
Why do we have to restate our plan?
Retirement plans are written based on laws and regulations set forth by Congress, the Department of Labor and the Internal Revenue Service. When laws change, your plan must be updated to reflect these changes. Rather than requiring plans to be restated every time there is a change in law, the Internal Revenue Service allows plans to simply be amended using what is called an “interim amendment”. Every six years, the IRS requires all plans to be restated (rewritten) to incorporate these “interim amendments” into the plan document. This current restatement cycle is commonly referred to as the PPA restatement.
Must my restated plan be filed with the IRS for a determination letter (approval)?
No, the IRS has already reviewed and preapproved Qualified Plans, LLC base plan language. Thus, employers using our preapproved plan documents automatically have assurance that the language used in their plan satisfies IRS requirements. As of May 1, 2012, the IRS no longer accepts requests for determination letters for preapproved plans.
Should I consider any change in my plan design when I amend or restate my plan?
You should regularly consider whether your qualified plan meets your goals, as well as the goals of your employees. This is an ongoing process that should be done regardless of when plans must be restated. Redesigning your plan is not the primary focus of the PPA Restatement. However, since the plan is required to be restated this is the best time to make any other minor plan design modifications you may be considering.
We have a safe harbor 401(k) plan and have been told we can only amend our plan at the beginning of each year. Does this impact the timing of our restatement?
Yes. Since the IRS has not made any exception for PPA, Qualified Plans, LLC is taking a conservative approach to restating safe harbor plans. All safe harbor plans will be effective as of the first day of the year following the restatement. For example, if we restate a calendar year plan in 2014, any changes to plan provisions will not be effective until January 1, 2015.
Do I have to give all participants a new Summary Plan Description (SPD)?
Yes, your employees should receive an updated SPD from your document restatement to comply with the DOL requirements for periodically restating the SPD.
What happens if I fail to amend or restate my plan on a timely basis?
If you fail to meet the final deadline of April 2016 for amending or restating your qualified retirement plan, the IRS can disqualify the plan and take away all of its tax benefits. This means contributions made after the required restatement date would become non-deductible or employees will have them immediately included in income. Plan earnings will be taxable and plan benefits distributed will not be permitted to rollover to other tax-deferred retirement accounts. Plans that elect to terminate must also first be updated for this required restatement before assets can be distributed. Therefore, restating your plan on a timely basis is a high priority.