Cycle 3 Restatement: Frequently Asked Questions

If you're someone involved with administering your company’s 401(k) plan, you might have heard about the Cycle 3 Restatement process. But you also might not have many details about what it is and what you’re supposed to do about it.

Read below to find answers to some of the frequently asked questions about the Cycle 3 Restatement process and how it affects you and your company’s 401(k) plan.

What is Cycle 3 Restatement?

Every six years, the IRS requires all Recordkeepers and Third-Party Administrators of company-sponsored retirement plans to rewrite—or “restate”—plan documents to include the latest legal and regulatory requirements enacted by Congress, the Treasury Department (IRS), and the Department of Labor.

Why Is It Called Cycle 3?

This is the third time the IRS has required a restatement of retirement plan documents. And the whole industry goes through this process – or cycle –at the same time to make sure every plan is treated fairly. So, it's the third cycle—or Cycle 3—of restatements.

Which Retirement Plans Have To Go Through This “Restatement” Of Their Plan Documents?

This cycle of restatements is for any defined-contribution (DC) plans that use IRS-pre-approved plan documents. Defined-benefit (DB) plans and 403(b) plans are on their own separate restatement schedule.

What Exactly Is Being Restated During This Process?

The purpose is to make sure your plan document contains the latest guidelines, legislation, and language. These plans and their documents are reviewed by the IRS and then approved via an approval letter. In order to make sure all these documents are being handled equally, the IRS sends out new approval letters for these types of plans at the same time. And if it doesn't happen, you could lose the tax advantages of providing a qualified company-sponsored plan.

What Are Some Of The Notable Updates During This Cycle?

The main revisions concern regulatory and legislative changes that occurred between 2010 and 2017 that impact retirement plans. A few of the notable changes include:

• Expanding the definition of “spouse” to include those of the same gender
• Expanding the types of contributions and earnings a plan may make available for hardship distributions
• Elimination of some safe harbor requirements
• Ability to amend safe harbor 401(k) plans after the year has already started
• Creation of in-plan Roth IRA transfers

Who Takes Care Of This Restatement?

Your Recordkeeper or Third-Party Administrator are responsible for restating your current plan documents into an up-to-date, IRS-approved plan document.

Shouls I Be Doing Anything About My Plan's Cycle 3 Restaurant?

Most of the work should be handled by your Recordkeeper or Third-Party Administrator. Most have already started reviewing and restating the plan documents they oversee. They should be communicating with you about timing for completion.

Once the document is restated, the plan sponsor—you—will be required to sign off on the new document.

When Does This Need to Happen?

All restated plan documents must be signed by the end of July 2022. If they aren't signed by then, there's a risk of losing the tax advantages of your plan.

Does This Cost Me Anything?

Some Recordkeepers and Third-Party Administrators include this service for free, while others may charge several hundred or thousands of dollars to restate your 401(k) plan document. You should reach out to your Recordkeeper or Third-Party Administrator to find out about the cost to you.

Is This A Good Time To Make Other Amendments To Our 401(k) Plan Document?

That depends on the changes you're requesting and the approach your Recordkeeper or Third-Party Administrator is taking to restate your plan document. It's best to reach out to them to find out if it's possible to make other changes during this process.

If you're considering making amendments to your plan, Fisher Investments offers a complimentary plan review. During the plan review, a retirement specialists can go over potential plan amendments.

Contact us to learn more about the Cycle 3 Restatement process or have a retirement specialist conduct a complimentary plan review.