Cycle 3 Post PPA Restatement for Solo 401(k) Clients

Its time for a restatement of your Solo 401(k) plan documents!  The below information will help you better understand why your Solo 401(k) requires a restatement, what you’ll need to do when you receive the restated documents, and also some exciting news about a new website we’re launching for our 401(k) clients.

The IRS imposes a six-year plan document cycle for defined contribution plans such as 401(k)s, that requires a rewriting of the 401(k) plan documents to incorporate legislative changes made during the previous cycle into the main plan documents.  Once the documents are rewritten, they must be certified by the IRS and adopted by you as the Solo 401k plan sponsor by a certain date – in this case, July 31, 2022.  Employers that do not restate their plan documents by July 31, 2022 will face penalties and possible disqualification of their 401(k) plan.  Let’s translate that into some plainer language.


Plan Document Provider & Pre-Approved Documents

Your Solo 401(k) uses our plan documents to define the plan.  Your 401(k) plan is registered under our IRS Opinion Letter and you may rely on it for your plan’s tax-exempt status.  This is true so long as your plan is on our Active list, and in good standing with our document license fee of $200/year.  Note that previously, what is now referred to as an IRS Opinion Letter, was called an IRS Determination Letter.   Plan document providers like us must maintain and amend our IRS-approved documents in response to legislative changes.  We tack on amendments, so to speak, to our plan documents as needed.  When we get through the six-year cycle, we must then rewrite the plan documents to include all of the amendments that have been tacked on over the previous six years.  The new documents are then submitted to the IRS for review, approval, and certification.  Once we receive approval for those documents, and our new IRS Opinion Letter, we can then restate all of our clients’ plan documents and begin the next six-year cycle.


Cycle 3 Restatement

This particular cycle is called “Cycle 3 Post PPA”, and per IRS Announcement 2020-7, all 401(k) plans in the United States are required to restate their documents with updated Cycle 3 documents that have been approved by the IRS.  Because of the way the IRS staggers their remedial cycles, this Cycle 3 period includes legislative changes made prior to February 1, 2017.  Therefore, there are a few amendments that are already “tacked on” your new restated documents.  These amendments are amendments required by the SECURE Act and the CARES Act, both of which were passed after February 1, 2017.

It’s important to note that the restated documents you’ll receive do not change your Solo 401(k)’s name, EIN, bank/brokerage/crypto accounts, or any investments your plan has made, nor does it have anything to do with contribution limits.  Think of it like pulling the engine out of a vehicle and replacing it with an updated engine.  The vehicle is the same, just the engine has changed.  Your 401(k) is like the vehicle – it remains the same, except for a new and updated set of documents defining the plan.

The long and short of it is that, we provide the documents that define your Solo 401(k), and your plan can rely on our IRS Opinion Letter for its tax-exempt status.  It’s our job to update and amend our documents when we’re required to by law.  In this case, the IRS’s six-year remedial cycle requires a complete rewriting and restatement of your Solo 401(k)’s plan documents which you must sign by July 31, 2022.


Restatement Documents to be Sent the 1st Week in March

We will be sending out your restated plan documents in the first week of March via an electronic signature request.  You’ll receive an email with a request to sign the documents, which will take only a couple minutes to click through and sign.  Once you’ve signed, you’ll receive a copy of the executed documents, which should be retained in your records.  If your Solo 401(k) has two Trustees, be aware that both you and your co-Trustee must sign the restatement documents.


Launch of New Website for Solo 401k Clients

Once you’ve signed your restatement documents, you will also receive instructions and a registration code to set up an account, giving you access to our new website that is specifically for our Solo 401(k) clients.  After you set up your account for the new website, you’ll be able to see the modules and articles we’ve prepared on how to best maintain your Solo 401(k) plan.  We’re excited about the new site, and would appreciate your feedback as you get in there and use it.

Here’s to a prosperous and healthy 2022 and beyond!