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What happens if our 401(k) plan missed the Cycle 3 restatement deadline?
What happens if our 401(k) plan missed the Cycle 3 restatement deadline?
Updated over a week ago

Every six years, the IRS requires us to restate, or rewrite, your qualified pre-approved retirement plan documents. The purpose of the Cycle 3 restatements is to incorporate any new regulatory changes that occurred since the documents were previously written.

When was the Cycle 3 deadline?

The Cycle 3 restatement deadline was July 31, 2022. All Guideline 401(k) plan trustees should have received a task within their dashboard to review and sign their updated plan documents before the deadline. If you (or your trustee) haven’t yet completed the restatement task, it’s not too late to do so.

You can generally self-correct this plan error by signing the Cycle 3 document as soon as possible.

Signing the Cycle 3 document will likely fix most plan errors. However, upon audit, it’s possible that the IRS will require a more thorough review of previously pre-approved documents than if the plan had maintained pre-approved documents all along.

How does this impact our 401(k) plan?

Because of the missed deadline, the IRS may review the plan documents and any prior amendments without the benefit of pre-approval. Any amendments or document language not up to date as required for an individually designed plan have the potential to disqualify the plan.

Nevertheless, disqualification is rarely the result of an IRS audit. More typically, the sanction amount is based on the severity of the errors but will be more costly than correcting the same error through the IRS’s Voluntary Correction Program. Self-correction is much less expensive and highly preferable to a potential sanction under an IRS audit.

Individually designed vs. pre-approved plan documents

Not adopting a pre-approved document on time is not in and of itself an IRS qualification error. This is because 401(k) plans have the option of using pre-approved plan documents.

401(k) plans are not required to follow the six-year pre-approved plan restatement cycle and can instead use individually designed plan documents. However, maintaining individually designed plan documents is typically much more costly than using IRS-pre-approved plan documents. Therefore, the majority of 401(k) plans use pre-approved plan documents.

If a pre-approved plan misses the Cycle 3 restatement deadline, the plan’s current document becomes individually designed and loses reliance on the pre-approval letter. According to the IRS, for a defined benefit plan, this means:

  • Any prior interim and discretionary amendments made while the plan was a pre-approved plan will need to be reviewed and corrected if they do not meet the requirements of IRC 401(a).

  • The rules for individually designed plans (Rev. Proc. 2016-37, section 5) would govern the remedial amendment period applicable for those, and all other required changes to determine how far back the form error occurred if one exists.


(See the May 23, 2022, Employee Plans News for more information. Note that while this information was specific to defined benefit plans, the same logic should apply to 401(k) and defined contribution 401(a) plans.)

The actual error will depend on whether the plan has timely adopted all required amendments (like amendments required for changes to the hardship rules or SECURE Acts). In addition, the IRS could decide the plan document language that was previously pre-approved is not sufficient and could require additional amendments and corrections for such errors.

The cost to review a plan for potential errors the IRS might identify upon audit is likely not worth the additional expense. For this reason, it is typically recommended to adopt a pre-approved document as soon as possible because most pre-approved plans are kept up to date for changes in law. Adopting a pre-approved plan sooner will also reduce the potential time the IRS could find document errors in an audit.

How to sign your Cycle 3 restatement plan documents

If you missed the original Cycle 3 document deadline, your plan trustee should address the documents as soon as possible. You can find instructions on how to review and complete the updated documents task here.


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