Idea: Save money and improve your 401k by including best practices in the next plan restatement.

Important: The window of time to get your 401k plan document restated is now open.

What is a 401k plan document?

Your Plan Document is very important. This is where you outline the rules of your retirement plan (plan design, eligibility, match calculation, etc). You must adhere to all these rules. During your DOL audit, the DOL will check to ensure you have followed those rules. Not following those rules could result in a fine. These fines can be expensive and these audits quite time-consuming.

Why does our plan document need to be restated?

Each year the laws change regarding 401k plans. Rather than have you restate the plan each year, the federal government allows you to group all the changes into one restatement every 6 years.

  • Is it all retirement plans or just 401k? – All 401k and Profit Sharing plans. Does not include 403(b) or Cash Balance plans.
  • Does it apply to all 401k plans? Yes
  • We just changed our plan document. Do we still have to do it? Yes.
  • What happens in the restatement? Your TPA will re-write your Plan doc. TPAs charge $1-2k for that service.
  • How long do we (plan sponsor) have to do this? 2 years from 8/1/2020 but it’s a good idea to get started now. It can be a time-consuming process and you don’t want to wait until the last minute.
  • Why should I do this now?
    • If you are having problems with your plan, now is a good time to fix those problems and include them in the plan restatement.
    • If you considered making changes to your plan, now is a good time to make that change and pay a single fee rather than pay one fee now and then another one later or one for each change you make.
    • If you’re not happy with your service providers (that includes TPA, 401k provider, financial advisor) now is a good time to make a change and not pay a new set of fees.
      • Bonus idea: A couple of the TPAs I work with waive this fee for new business so you could avoid this fee altogether (save $1,500!) by making the change now.
    • What are some problems that I could address now?
      • Failing annual testing.
      • Excess contributions: If some employees are getting excess contributions returned at end of year and/or employees are prohibited from contributing higher amounts.
      • Low participation: If you have low participation and want to improve it
      • Contribution rate: If you have a low contribution rate and want to improve it
      • Poor performing investment lineup: If you have underperforming funds in your lineup and want to improve them

Next steps: Get advice and guidance about 401k Plan Document Restatement

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This information was developed as a general guide to educate plan sponsors, but is not intended as authoritative guidance or tax or legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation. In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.