What is a Cycle 4 Restatement and why does it matter?

Let’s start with a clear explanation of restatement

All qualified retirement plans are required to have a written plan document. Every six years or so, the IRS requires pre-approved plan documents to be restated to include regulatory and legislative changes since the prior cycle. The current restatement cycle for defined contribution plans (other than 403(b) plans) is known as Cycle 4.

A restatement is a full rewrite of your plan document

Your plan document will be rewritten by a document provider to incorporate the specified law changes from the IRS since the last cycle – it’s not simply an amendment or redline. The new Cycle 4 language will include provisions from the CARES Act, the original SECURE Act, and parts of SECURE 2.0 that didn't exist under Cycle 3 pre-approved document.

The IRS may also require changes to existing plan document provisions when the newly approved plan documents are adopted. If DWC is preparing your restatement, you’ll be able to review these changes with your DWC representative to determine your preferred elections and how they may impact your plan’s operations – a value-added service that sets DWC apart.

This restatement is also an opportunity to look at your broader plan design and layer in any discretionary changes that you deem appropriate. An advantage of working with DWC as your Third Party Administrator (TPA) is the hands-on support we provide to our clients.

Plan sponsors will be hearing about “restatement” a lot over the next year

The Cycle 4 Restatement affects existing 401(k), profit sharing, money purchase, and 401(a) plans that use a pre-approved plan document. If your plan existed in 2020–2022, you may remember the last restatement, Cycle 3, whose window closed July 31, 2022.

Earlier restatements were named for the major legislation they incorporated, such as the PPA Restatement (“Cycle 2”) for the Pension Protection Act of 2006. Starting with Cycle 3, restatements are now referred to by cycle number instead. It’s a good idea to know what a Cycle 4 Restatement is and what steps you’ll need to take during the process.

Get to know the restatement sequence

There are four basic steps in the process:

1. The IRS specifies which regulatory and legislative changes must be incorporated into the new document, referred to as a Cumulative List.
2. Plan document vendors (such as Relius and FTW) draft updated documents and submit them to the IRS for review and approval.
3. Over a two-year window, the IRS reviews the draft documents, coordinates updates with the document vendors, and issues an Approval Letter after the document language has been approved. All vendors that submitted their draft documents in a timely manner and completed requested changes will receive their letters at the same time.
4. Once Approval Letters are issued, the restatement window opens, giving plan sponsors a roughly two-year period to adopt the new plan documents.

Currently, we are awaiting the IRS Approval Letters for the Cycle 4 documents. After receipt of those letters, our team will begin communicating process details, timelines, and additional information on the requirements associated with Cycle 4.

Be ready and reach out to DWC

Remember, Cycle 4 is mandatory, and the process is already in motion. DWC helps clients through the restatement, from plan design to adoption, working together closely to review what’s changing and identify additional, worthwhile updates. Contact DWC today.