By: Bryan Uecker, QPA, QPFC, AIF, AIFA
Defined Benefit (DB) Plans are an essential component of retirement planning, offering predictable income streams for participants. However, staying compliant with government regulations is critical for plan sponsors. One of the key compliance requirements is the periodic restatement of plan documents to reflect legislative and regulatory changes. We’re currently in the Cycle 3 Restatement period for DB Plans, and plan sponsors should ensure they meet the deadlines and requirements to remain compliant.
What Are Cycle Restatements?
Cycle restatements are part of the IRS’s pre-approved plan document program. Every few years, the IRS requires plan sponsors of retirement plans—such as Defined Contribution (DC) and Defined Benefit (DB) Plans—to restate their plan documents. These restatements incorporate recent legislative and regulatory updates to ensure the plan operates in compliance with current laws.
For DB Plans, the current restatement period, known as Cycle 3, opened August 1, 2023 and will close on March 31, 2025. Plan sponsors must adopt the updated Cycle 3 document within this window.
What’s New in Cycle 3 Restatements for DB Plans?
Cycle 3 restatements incorporate a variety of regulatory and legislative updates enacted since the last restatement cycle. Some key updates include:
- SECURE Act
The Setting Every Community Up for Retirement Enhancement (SECURE) Act introduced provisions to expand access to retirement savings and increase flexibility. Employers must ensure their DB Plans reflect these changes, such as updated rules for required minimum distributions (RMDs). - Bipartisan Budget Act of 2018
This legislation introduced changes to hardship withdrawals and other plan operations that may need to be reflected in the updated document. - Other IRS Guidance
Recent IRS procedures and notices have clarified certain operational requirements for DB Plans, which should now be incorporated into the Cycle 3 restatements.
Why Are Restatements Important?
Plan restatements aren’t just a bureaucratic requirement—they’re essential for maintaining the tax-qualified status of your DB Plan. A failure to restate the plan document by the deadline can result in significant penalties, including the potential loss of tax benefits for both the employer and plan participants. Regular updates also help ensure the plan is operating as intended and providing the intended benefits.
If you have questions about Cycle 3 restatements or need assistance navigating the process, don’t hesitate to reach out to DRDA as your TPA . Compliance may seem complex, but with proper guidance, it’s entirely manageable!
