By Kenneth Marblestone, JD

The IRS requires all qualified retirement plans to be restated periodically to bring them into compliance with changes in the law since the last generation of documents. Although it may seem as though it was only yesterday that defined contribution plans – including profit sharing and 401(k) plans – were last required to be restated based on changes in the law through 2010, the last restatement period, commonly referred to as the PPA Restatement, ended in 2016.

The current restatement period for defined contribution plans began July 1, 2020, and will end on June 30, 2022. This restatement, referred to as the Post-Pension Protection Act restatement (Post-PPA Restatement) or the Third Cycle (DC-3) Restatement, will bring plans up to date to reflect laws, regulations, and court decisions through the 2017 Cumulative List (IRS Notice 2017-37).

Since that time, however, there have been numerous changes to the law that were not considered in the IRS review of the Post-PPA Restatement documents, and, accordingly, each restatement will require additional plan amendments at the time the plan is restated or shortly thereafter. These include the following considerations.

Bipartisan Budget Act of 2018 – This act liberalized the rules governing hardship distributions, including the ability to include earnings on 401(k) contributions in hardship distributions and the elimination of the six-month suspension for 401(k) contributions applicable to participants receiving hardship distributions. This “hardship amendment” must be adopted no later than the end of the plan year beginning in 2021.

Setting Every Community Up for Retirement Enhancement (SECURE) Act – This act made numerous changes to the operation of qualified retirement plans, most notably:

• A change in the age at which required minimum distributions must commence from 70 ½ to 72.
• A modification to required distribution rules for designated beneficiaries.
• A requirement to permit long-term, part-time employees to participate in a 401(k) program beginning in 2024.
• Changes in the rules relating to the election of 401(k) safe harbor status, including the elimination of the advance notice requirement for safe harbor nonelective contributions

Amendments relating to the SECURE Act must be adopted no later than the end of the plan year beginning in 2022.

Coronavirus Aid, Relief, and Economic Security (CARES) Act – Enacted as a result of the COVID-19 pandemic, this act provided the following:

• Coronavirus-related loans and distributions for Qualified Individuals (participants directly or indirectly affected by the pandemic)
• Suspension of loan repayments for Qualified Individuals
• Waiver of required minimum distributions for 2020

Amendments relating to the CARES Act also must be adopted no later than the end of the plan year beginning in 2022. Unlike the SECURE Act amendment, however, the CARES Act amendment will have to be tailored to each adopting employer, depending upon which of the changes the employer chose to implement for its plan.

CPAs should make sure that their clients are aware of these requirements so that their plans are not inadvertently subject to potential disqualification in the event of an IRS audit following the close of the restatement period.

Kenneth Marblestone, JD, is a co-managing member of The MandMarblestone Group LLC in Philadelphia. He can be reached at marblestone@mand.com.

Kenneth Marblestone will speak more on the CARES Act and other regulatory developments at PICPA’s Employee Benefit Plans Conference Webcast on May 19, 2021.

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