Resource Articles Back to Article List

Pension Protection Act (PPA) Restatement Guidance

One of the legal requirements for maintaining a qualified retirement plan is that the plan be in writing. Unfortunately, one consequence of the written plan requirement; you must amend your plan to reflect changes in the laws governing retirement plans. In some cases, these changes may be handled with “short” tack-on amendments to the plan. In other cases, the plan must be rewritten in its entirety (this is referred to as a restatement).

In the past, the IRS has permitted fairly long delays between the time a modification in the law required plan restatement. The IRS has now set out a staggered remedial amendment system for qualified plans, with a five-year amendment/approval cycle for individually designed plans and a six-year cycle for pre-approved plans. As an example, a prototype sponsor submits their plan for IRS approval (pre-approved) in years one and two of the cycle. The IRS has two years to review, and the adopting employers have two years to adopt the restatement—hence the six-year cycle.

Most employers using a pre-approved prototype plan will need to restate their plans every six years. Although the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) restatement cycle is just a faint memory (ended April 30, 2010), the IRS has now revealed the PPA restatement cycle. Under IRS Announcement 2014-16, the IRS announced the opening of the 2-year period for employers using pre-approved documents to restate their plans. The official restatement period is May 1, 2014 through April 30, 2016.

Although the need to restate a pre-approved prototype plan is mandatory, it offers an excellent opportunity to evaluate your current plan provisions and ensure that your plan still meets your needs and expectations. New plan designs and options may now be available that may better fit your employee group and your personal needs.

Following the law to restate your plan is serious business and should be given high priority. If you fail to meet the deadline for restating your qualified retirement plan, the IRS can disqualify the plan and thus everyone involved (plan sponsor and plan participants) lose the plan’s tax benefits.

Remember, a well-designed retirement plan can give you and your employees the tool they need to build a financially sound future. While salary is an important component in attracting and retaining an employee, the benefits offered are becoming increasingly more important. Offering the right mix of benefits, in an easy to understand format, can often make the difference in your ability to recruit, motivate and maintain positive morale among your most important resource.