2 min read
From time to time, all qualified retirement plans are required to be updated to reflect recent legislative and/or regulatory changes. As you may know, it is a fiduciary responsibility to update your retirement plan document with the most recent legislative or regulatory changes. The Internal Revenue Service (IRS) requires that qualified retirement plans be restated to incorporate regulatory changes in the plan document. The plan document is analogous to a plan’s operational rule book. When rules change, the book needs to be updated. The restatement process is intended to incorporate the regulatory changes that have occurred since the plan was last updated.
The restatement is not contingent on how many years your plan has been in effect. The IRS determines the timing of the restatement cycle with the current cycle which started August 1, 2020 and goes through July 31, 2022. The IRS requires restatement around every six years.
Plan restatements are mandatory to remain in compliance. Plans that do not go through this mandatory restatement process are subject to IRS penalties which could include the potential revocation of the plan’s tax-deferred status which would negatively affect the plan sponsor and participants. Employer contributions may not be tax deductible, and participants may lose the ability to defer contributions on a tax-free basis. Additional penalties and fees can be imposed by the IRS. If you miss a restatement deadline, the IRS does offer a Voluntary Correction Program to correct the issue of the missed restatement. The cost for this option, in most cases, is less expensive than the penalty that would be assessed by the IRS if they discovered your plan is out of compliance.
Once a plan has been restated, employers should provide plan participants with a new summary plan description.
Often the plan provider will handle the restatement process to be sure a company’s plan is up to date. The plan restatement costs around $1,000. If you have been considering changing plan providers, now may be the perfect time to move to a different 401k provider if you were already considering it. This could be a cost savings of $1,000 to $2,000, in most cases. DP Grow, a full service 401k Provider, would appreciate the opportunity to empower your future and provide guidance on your plan!
To schedule a consultation, please contact Dennis Tender at 804.729.3819 or email at dtender@dp-grow.com.
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by DP Grow, LLC. [“DPG]), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from DPG. Please remember to contact DPG, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. DPG is neither a law Firm, nor a certified public accounting Firm, and no portion of the commentary content should be construed as legal or accounting advice. A copy of the DPG’s current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request. Please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.