Question: I’m being told I must rewrite my 401(k) plan document and there is nothing wrong with the one I’m using now. Why do I have to do this?
Why the IRS May Determine Your Plan Document is Outdated
If your plan document was created before 2014, chances are pretty good your document is outdated. The IRS allows you to “tack-on” amendments to your existing document whenever Congress decides to make changes to retirement plan related laws. However, after so many of these changes, the IRS decides it is time to restate your entire plan document whether you think it needs it or not in order to incorporate those tack-on amendments into the body of the document. Your plan document should have an IRS approval letter authorizing the language within as acceptable. As an incentive to restate your document, the IRS will consider this approval letter obsolete after a stated deadline and at that point will consider the plan to be out of compliance.
The latest restatement period opened in May 2014 and closed April 30, 2016 so if your document hasn’t been created or updated during that time period, your document could be considered too old.
What to do if Your 401(k) Plan is Outdated
If you find yourself in this position, all is not lost. You have the ability to make things right by using the IRS non-amender kit as part of their Voluntary Correction Program as long as the plan is not currently under IRS examination. You will need an updated document to go with the submission so you should contact your original plan document provider or your current third party administrator to update your document before filing through the program. Click here for the IRS’ instructions on how to correct a missed restatement deadline.