For the millions of business owners that offer a workplace retirement plan, the COVID-19 pandemic created many financial difficulties.
However, as the economic climate improves, there is an opportunity for employers to refresh their company’s retirement plan. With an important plan document restatement deadline happening in 2022, there’s never been a better time for employers to reevaluate their current plan design and, if necessary, add or update features that align with their business objectives and retirement plan goals.
Every six years, the IRS requires business owners to restate their pre-approved qualified retirement plan documents to ensure they are up-to-date and compliant with current regulatory and/or legislative changes. A restatement means the plan document must be completely rewritten to reflect mandatory regulatory changes, as well as any voluntary changes made to the plan since the last update. But don’t worry, this is very normal and nothing to fear.
The latest restatement cycle for these plans began on August 1, 2020 and will close on July 31, 2022. It’s known as “Cycle 3,” since it’s the third restatement period required under the pre-approved retirement plan program.
Since the last restatement period that ended in April 2016, there have been several legislative and regulatory changes that impact retirement plans. However, this restatement period doesn’t include regulations introduced in the Setting Every Community Up for Retirement Enhancement (SECURE) Act and the Coronavirus Aid, Relief, and Economic Security (CARES) Act. They must be addressed in separate, good faith amendments.
Restatement is mandatory. Plans that haven’t complied by the deadline could face penalties from the IRS. Even newly established or terminating plans need to restate their plan documents.
The restatement period provides employers with an opportunity to enhance their existing retirement plans — especially in light of the pandemic. Updating the plan’s design now could better position business owners, employees, and companies for the future.
Like many employers, you may be looking for ways to prepare your employees more effectively for retirement by increasing focus on plan design, investment performance, and financial wellness. With these motivations top of mind, here are some plan design features worthy of consideration:
The pandemic presented unprecedented challenges for employers that offer retirement plan benefits. With the future looking brighter and the Cycle 3 restatement deadline around the corner, now is the optimal time for business owners to review, and if necessary, update their plan design to confirm it aligns with their company’s goals and cash flow obligations.
This article is for educational purposes only. The tax and legal references attached herein are designed to provide accurate and authoritative information with regard to the subject matter covered and are provided with the understanding that LoVasco Consulting Group is not engaged in rendering tax or legal services. If tax or legal advice is required, you should consult your accountant or attorney. LoVasco Consulting Group does not replace those advisors.
Securities and Investment Advisory Services offered through M Holdings Securities, Inc., a registered broker dealer and Investment Advisor, member FINRA / SIPC. LoVasco Consulting Group is independently owned and operated.
Return to Insights Page
LoVasco Consulting Group and their agents are presently licensed to sell traditional life insurance in Michigan as a resident producer and numerous other states as a nonresident producer. This site is not intended as an offer to sell securities, which may be done only after proper delivery of a prospectus and a client suitability review. Proper state registration is mandatory prior to conducting business in any state. Securities and Investment Advisory Services offered through M Holdings Securities, Inc., a registered broker dealer and Investment Advisor, member FINRA / SIPC. Check the background of this Firm and/or investment professional on FINRA's BrokerCheck. LoVasco Consulting Group is owned and operated independently from M Holdings Securities, Inc. LoVasco Consulting Group is a member of M Financial Group. Please click here for further details regarding this relationship.