Solo 401k & QRP IRS Required Plan Restatement
- Restate your plan by July 31, 2022 to keep it current with the latest rules and regulations. Restatement is required by law for all qualified plans.
- 401(k) plans must be updated from time-to-time to conform to changes in the federal tax laws made by Congress or to reflect official guidance issued by the IRS.
- Because it`s been six years since the last restatement requirement, the IRS requires that you restate your plan documents to bring them into compliance with all the latest regulations, including any changes to IRS plan rules.
- You can learn more about the changes by reading this IRS summary.
- If your documents are not updated by the IRS-imposed deadline of July 31, 2022, your plan may be at risk of losing its tax-qualified status.
How do I get my Solo 401(k)/Individual 401(k)/”QRP” restated?
- ReSure Financial clients that are up-to-date on their plan document maintenance service fees: You should have new, up-to-date Solo 401(k) documents in your client portal account. Please reach out through your account with any questions you may have.
- Self-Directed Investors that have not created and maintained their plan documents through ReSure: You may apply for Solo 401(k) plan restatement by completing an Express Checkbook 401(k) Application by clicking here.
Q & A: Required Solo 401(k) and QRP Restatement
(Note to view a recording of the recent live 401k Plan Restatement Event, visit the ReSure Investor Member Space by clicking here and view past events.)
Per the IRS:
- All 401(k) plans must be established and supported by a formal written plan document that complies with the Internal Revenue Code (IRC).
- The IRS generally establishes a firm deadline by which plan amendments reflecting tax law changes must be adopted.
- A plan document failure occurs when you don’t have your plan document up-to-date or if your plan document doesn’t fully comply with the tax law.
- This requirement applies to all 401(k) plans, whether active or not, for as long as assets remain in the plan.
- Terminating plans must be updated for law changes through the date of termination.
What is a Solo 401(k)/QRP Restatement?
A plan restatement is achieved by adopting a completely new and updated plan document that replaces the prior plan document.
Does a 401k/QRP restatement result in the adoption of a new 401k or Qualified Plan?
No. The plan that was in place continues, only with new IRS-approved governing documents.
How is a 401k or other Qualified Retirement Plan Restated?
401(k) Plans, including Solo 401k plans, are restated by signing new 401k plan documents that:
- contain IRS-required updates for current compliance and
- state that these newly adopted 401k plan documents are intended to be a restatement of the previously adopted plan.
What happens if I don’t restate my Qualified Retirement Plan by the required IRS deadline?
If the governing document of a Qualified Retirement Plan (QRP), including 401k plans, is not timely updated, such plan may be disqualified.
What are the Tax Consequences of 401(k)/QRP plan disqualification?
When an Internal Revenue Code section 401(a) retirement plan – 401(k) plan, defined benefit plan, cash balance plan, or other QRP – is disqualified, the plan’s trust loses its tax-exempt status and becomes a nonexempt trust. The specific tax consequences of plan disqualification vary, based on plan type, plan design, and numerous additional tax factors. Plan disqualification affects three entities or persons: (1) Employees/Plan Participant, (2) Employer/Plan Sponsor, (3) The Plan’s Trust. In the case of a Solo 401k, in which a single individual wears all 3 “hats,” that individual bears the full brunt of plan disqualification.
Following are a list of potentially applicable tax consequences of plan disqualification:
- Consequence 1 – Contributions in Gross Taxable Income
- Consequence 2 – Tax Deductions are Limited
- Consequence 3 – Plan Trust Owes Income Taxes on the Trust Earnings
- Consequence 4 – Rollovers are Disallowed
- Consequence 5: Contributions Subject to Social Security, Medicare and Federal Unemployment (FUTA) Taxes
Must I restate plan if I’m planning to terminate it or stop investing with it?
YES! Terminating plans must be updated for law changes through the date of termination. Even if you intend to close down your Solo 401k, the plan must be restated to avoid the tax consequences of plan disqualification.
What else should I be asking at this time?
Now’s a great time to revisit your “Solo 401k credentials.”
Remember: To establish and maintain a Solo 401k, i401k, Individual 401(k), Solo QRP, or any other marketing name such plans go by, you must have a “Solo Business.” A Solo Business has 2 components:
- business activity and
- no non-owner employees in that business or any related business. If you or your spouse have employees in any business that you own, professional advice should be sought prior to establishing or maintaining a Solo 401k.
IRS 401(k)/QRP Plan Document Pre-Approval and Restatement Resources
- Notice 2017-37: Cumulative List of Changes in Plan Qualification Requirements for Pre-Approved Defined Contribution Plans for 2017
401(k) Plan Fix-It Guide – You haven’t updated your plan document within the past few years to reflect recent law changes
Cumulative List of Changes in Retirement Plan Qualification Requirements
- Announcement 2020-7: Third Six-Year Cycle Pre-Approved Defined Contribution Plans: Issuance of Opinion Letters; Plan Adoption Deadline; and Opening of Determination Letter Program
- Rev. Proc. 2017-41