IRS-Related Questions

What is a plan restatement for the Self-Directed Solo 401(k)?

Every six years, the IRS requires all qualified retirement plans to update their plan documents to reflect recent legislative and regulatory changes. We will contact all Solo 401(k) customers in Spring of 21 if they need a plan restatement.

2020 and early 2021 updates

We will be reaching out in spring 2021, after all, 2020 FMV customers have been taken care of. All 401(k) plans purchased and adopted AFTER 10/14/2020 Solo 401(k) clients already have "Cycle 3" plans and do not require a restatement.

Why do I need a plan restatement?

Every six years, the IRS requires all qualified retirement plans to update their plan documents to reflect recent legislative and regulatory changes. Some updates are made during the normal course of business through plan amendments, but others require more substantial rewriting of plan documents through a formal process known as a “plan restatement.”

What is a plan restatement?

A restatement is a complete re-writing of the plan document. It includes voluntary amendments that have been adopted since the last time the document was re-written, along with mandatory amendments to reflect additional legislative and regulatory changes.

This upcoming mandatory restatement period for defined contribution plans is referred to as “Cycle 3” because it is the third required restatement that follows this six-year cycle.

Is the current plan restatement mandatory or voluntary?

The upcoming plan restatement is mandatory, even if your plan was amended for various reasons in the recent past. Plans that do not meet the July 31, 2022 restatement deadline will be subject to penalties, up to and including revocation of tax-favored status. This means contributions might not be deductible and would be immediately included as income to employees.

Why do plans have to be restated?

Retirement plans are governed by ever-changing laws and regulations imposed by Congress, the IRS, and the Department of Labor (DOL). To remain in compliance and current with those laws and regulations, plan documents must be updated from time to time. Some of these changes may be reflected through plan amendments, but it is impractical for plans to amend their documents for every new law or regulation.

What has changed since the last restatement?

The deadline for the last mandatory restatement was April 30, 2016, but it was based on documents approved by the IRS two years prior and only reflected legislative and regulatory updates through 2010. Since then, there have been a number of regulatory and legislative changes impacting retirement plans such as the availability of plan forfeitures to offset certain additional types of company contributions and good faith amendments like the SECURE and CARES Acts.

But we just started our plan! Surely we don’t need to go through this process?

Unfortunately, the restatement cycle is dictated by the IRS without regard to a plan’s inception date. This process is required for all 401(k) plans and the document should be executed in a timely manner to remain compliant and qualified. Plans purchased and adopted AFTER 10/14/2020 Solo 401(k) clients already have "Cycle 3" plans and do not require a restatement.

Is there a fee for this plan restatement?

Part of our reoccurring fee at Rocket Dollar is covering plan restatement for all solo 401(k)s