• Why do I need to keep amending my plan?

The law requires that a qualified retirement plan be in writing. This means that as the laws change, your plan must generally be amended to reflect the changes. An immediate amendment is not always required. Congress or the IRS usually provide a period of time after the effective date of a new law for plan sponsors to amend their plans to reflect any changes. As a result, the written terms of your plan may not always match the way your plan is currently being operated.

 

• Why do I need to restate my plan?

The number of plan amendments (i.e., separate snap-on amendments) can become unwieldy due to the frequency of changes to the laws. As the number of amendments increase, it becomes more difficult to read and understand the terms of the plan. In addition, some changes in the laws may require a review of the overall design of your plan to ensure it meets your needs. These, as well as other factors, may require that your plan be restated in its entirety.

 

• When do I need to restate my plan?

Most employers will need to restate their plans every 6 years; however some plans will need to be restated every 5 years. The determination of whether a plan is subject to the 6-year restatement cycle or the 5-year restatement cycle can be complex. However, as a general rule, employers using “pre-approved” plans are subject to the 6-year restatement cycle and employers using the “individually designed” plans are subject to the 5-year restatement cycle. Most employers use “pre-approved” plans and are therefore subject to the 6-year restatement cycle.

 

• What happens if I fail to amend or restate my plan on a timely basis?

If you fail to meet the deadline for amending or restating your qualified retirement plan, the IRS can disqualify the plan and take away all of its tax benefits. This means contributions might not be deductible or employees will have them immediately included in income. Therefore, restating your plan on a timely basis must be a high priority.

 

• Do I have to give all participants a new Summary Plan Description?

Yes. The Department of Labor (DOL) requires that employees be informed about any material changes that are made to your plan.