SECURE Act 1.0, SECURE 2.0, and several years of retirement plan changes are finally making their way into the next generation of 401(k) plan documents.
If you have sponsored a 401(k) plan for 10+ years, you have probably signed a few giant documents without reading every page. No judgment. Even ERISA attorneys need coffee for that.
Most 401(k) plans use an IRS pre-approved plan document. Think of the plan document as the official rulebook for your 401(k): who can participate, when employees enter, what contributions are allowed, how distributions work, and dozens of other rules.
Congress and the IRS keep changing those rules. Rather than rebuilding the entire rulebook every time Washington changes something, plans generally use amendments, which are updates to specific provisions. Then, approximately every six years, the IRS requires pre-approved plans to be rewritten or “restated” onto a new document. That is the remedial amendment cycle.
A quick history of your 401(k)’s previous cycles
Each cycle essentially takes years of legislative and regulatory changes and folds them into a new IRS-approved document.
- Cycle 1 — EGTRRA: The first six-year cycle incorporated the Economic Growth and Tax Relief Reconciliation Act of 2001 and other changes on the IRS’s 2004 Cumulative List. Employers generally had until April 30, 2010 to adopt their new documents.
- Cycle 2 — PPA: Next came the Pension Protection Act era. These documents incorporated PPA and other qualification changes contained on the 2010 Cumulative List. Most employers restated by April 30, 2016.
- Cycle 3: The next restatement incorporated changes on the IRS’s 2017 Cumulative List. Employers generally had until July 31, 2022 to adopt their Cycle 3 documents.
- Cycle 4: And here we are. The IRS’s newest pre-approved documents are based on its 2023 Cumulative List. The IRS expects Cycle 4 opinion letters beginning around August 31, 2026, with employers having until September 30, 2028 to adopt the Cycle 4 document.
Cycle 4 is a BIG one
Cycle 4 matters because a lot has happened since the last document was written including the SECURE Act of 2019, SECURE 2.0, the CARES Act, disaster-relief legislation, and related IRS guidance.
Depending on your plan and the provisions you elected, the new document and related amendments may need to address items such as:
- New required minimum distribution (RMD) rules and ages
- Long-term, part-time employee eligibility requirements
- Changes to safe harbor 401(k) rules
- Qualified birth and adoption distributions
- New emergency expense and domestic-abuse distribution provisions
- The increased $7,000 involuntary cash-out limit
- Optional Roth employer matching and nonelective contributions
- New rules affecting catch-up contributions
- Permanent rules for certain federally declared disaster distributions and loans
- Other SECURE 1.0, SECURE 2.0, CARES Act, and regulatory changes applicable to your plan (IRS)
One important wrinkle: not every SECURE 2.0 provision is actually contained in the Cycle 4 document. The IRS limited its Cycle 4 review to provisions included on the 2023 Cumulative List. Other SECURE 2.0 changes still require timely interim or discretionary amendments.
This isn’t just paperwork, it’s a plan checkup
Here’s where 401(k) plan sponsors should pay attention.
A restatement is an excellent opportunity to ask:
Does the 401(k) we designed years ago still make sense for the company we have today?
Your workforce may have changed. Your compensation structure may have changed. Maybe recruiting is harder. Maybe retention matters more. Maybe you have more highly compensated employees, part-time employees, or different ownership goals.
Review eligibility, matching contributions, profit sharing, vesting, automatic enrollment, Roth, distributions, and other plan features. Sometimes the best outcome isn’t merely making the document compliant but making the plan better.
Your next step: review, update and ask questions
Cycle 4 is essentially the IRS saying, “Time for a new rulebook.” But don’t treat this as another document that simply needs a signature.
Use the process to confirm that your plan documents and amendments accurately reflect how your 401(k) actually operates, incorporate applicable legislative and regulatory changes, and still support the needs of your business and workforce.
To review your plan from a different perspective, contact us for the Retirement Plan Optimization Guide. This is a comprehensive guide regarding retirement plan design that our team can walk through with you.
This information is provided as a general guide to educate plan sponsors. It is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.
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