1.2 Written Plan Documents, Pre-Approved vs. Individually Designed Plans & Restatements

ASPPA Qualified 401 k

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1 Chapter 1: Plan Qualification Requirements

1.1 IRC §401(a) Core Qualification Requirements & Exclusive Benefit Rule 1.2 Written Plan Documents, Pre-Approved vs. Individually Designed Plans & Restatements 1.3 Anti-Alienation, Qualified Domestic Relations Orders (QDROs) & Claims Procedures

2 Chapter 2: Retirement Plan Types & Structures

2.1 Defined Contribution vs. Defined Benefit Fundamentals & Hybrid Cash Balance Plans 2.2 Profit Sharing, Money Purchase & 401(k) Cash or Deferred Arrangements (CODAs) 2.3 Other DC Designs: ESOPs, SEPs, SIMPLE IRAs, SIMPLE 401(k)s, 403(b)s & 457(b)s

3 Chapter 3: Eligibility & Participation Rules

3.1 Statutory Age and Service Conditions Under IRC §410(a) 3.2 Hours-of-Service Crediting vs. Elapsed-Time Method 3.3 Plan Entry Dates, Dual Eligibility & Computation Periods 3.4 Amending Plan Eligibility Requirements & Explaining Eligibility to Plan Sponsors

4 Chapter 4: Special Eligibility Provisions & Long-Term Part-Time Employees

4.1 Excludable Employee Classifications & Job Categories 4.2 SECURE 2.0 Long-Term Part-Time (LTPT) Rules (500 Hours / 2-Year Standard) 4.3 Breaks in Service, Re-Employment Rules & Service Re-Crediting 4.4 Service Across Employers: Predecessor Employers, M&A Transitions, Leased Employees & Independent Contractors

5 Chapter 5: Vesting Schedules & Forfeiture Handling

5.1 Statutory Vesting Schedules: 3-Year Cliff, 2-to-6-Year Graded & 100% Immediate 5.2 Calculating Years of Vesting Service, Computation Periods & Service Exclusions 5.3 Forfeiture Determination, Timing, Allocation Methods & Re-Crediting 5.4 Mandatory Full-Vesting Events, Vesting Schedule Amendments & the 3-Year Election

6 Chapter 6: Employee Contributions & Deferral Limits

6.1 Pre-Tax Elective Deferrals & Designated Roth 401(k) Contributions 6.2 IRC §402(g) Annual Limits, Age-50 Catch-Up & SECURE 2.0 Super Catch-Up 6.3 Voluntary After-Tax Contributions & Automatic Contribution Arrangements (ACA, EACA) 6.4 Rollover Contributions Into the Plan: Eligible Sources, Direct vs. 60-Day Rollovers & Invalid Rollovers

7 Chapter 7: Employer Contributions & Allocations

7.1 Employer Matching Contributions: Fixed, Discretionary & Tiered Formulas 7.2 Discretionary Profit-Sharing: Pro-Rata Comp-to-Comp & Permitted Disparity (Social Security Integration) 7.3 Age-Weighted Allocations, Cross-Testing / New Comparability & Allocation Conditions 7.4 IRC §415(c) Annual Additions Limits, Excess Corrections & §404 Deduction Caps

8 Chapter 8: Safe Harbor 401(k) Plan Design

8.1 Traditional Safe Harbor Formulas: 3% Nonelective vs. Basic and Enhanced Matching 8.2 Qualified Automatic Contribution Arrangement (QACA) Safe Harbor 8.3 Safe Harbor Notice Rules, Mid-Year Elections, Suspension & SECURE 2.0 Flexibility 8.4 Safe Harbor Advantages, Disadvantages & the Top-Heavy Exemption 8.5 Verifying Safe Harbor Contribution Compliance & Comparing Safe Harbor to Non-Safe Harbor Plans

9 Chapter 9: Participant Loans & Compliance

9.1 IRC §72(p) Statutory Loan Limits ($50,000 / 50% Vested Balance Calculation) 9.2 Loan Terms: 5-Year Amortization, Principal Residence Exception & Interest Rates 9.3 Loan Defaults, Cure Periods, Deemed Distributions vs. Plan Loan Offsets

10 Chapter 10: Plan Distributions & Distributable Events

10.1 Distributable Events: Severance, Death, Disability & Normal Retirement 10.2 In-Service Withdrawals, Hardship Distributions & SECURE 2.0 Emergency Access 10.3 IRC §72(t) 10% Early Distribution Penalty & Statutory Exceptions 10.4 QJSA and QPSA Survivor Annuity Rules, the DC Plan Exemption & Spousal Consent Administration 10.5 Distribution Restrictions by Contribution Source & Plan Termination Distributions

11 Chapter 11: Mandatory Cash-Outs, Taxation & RMDs

11.1 Mandatory Cash-Out Limits ($7,000 Threshold) & Automatic Rollover IRAs 11.2 Taxation of Distributions, 20% Mandatory Federal Withholding & Direct Rollovers 11.3 Required Minimum Distributions (RMDs) Under IRC §401(a)(9) & SECURE 2.0 (Age 73) 11.4 Distribution Tax Reporting: Form 1099-R Codes, Form 945, In-Kind Distributions & Net Unrealized Appreciation

12 Chapter 12: Compensation Definitions for Testing & Allocations

12.1 IRC §415 Statutory Compensation Definitions: W-2, Box 1 & Section 3401(a) 12.2 IRC §414(s) Safe-Harbor vs. Custom Compensation & Nondiscrimination Testing 12.3 IRC §401(a)(17) Annual Compensation Limit & Deemed / Partial Year Rules 12.4 Applying the Plan's Compensation Definition: Components, Payroll Mapping & Common Administrative Errors

13 Chapter 13: Highly Compensated Employee (HCE) Determination

13.1 IRC §414(q) Statutory Tests: 5% Owners & Compensation Lookback ($160,000 Threshold) 13.2 Top-Paid 20% Group Election & Determination Year Mechanics 13.3 Family Attribution Rules Under IRC §318 / §1563 in HCE Determination 13.4 Former HCEs, Short Plan Years & Non-Calendar-Year HCE Determination

14 Chapter 14: Minimum Coverage Testing: Ratio Percentage Test

14.1 IRC §410(b) Coverage Framework, Testing Group & Statutory Excludable Employees 14.2 Calculating Benefiting Participants & The Ratio Percentage Test (70% Standard) 14.3 Testing Frequencies (Daily, Quarterly, Annual) & Controlled Group Impacts 14.4 Deemed-Pass Situations & Correcting a Failed Coverage Test

15 Chapter 15: Minimum Coverage: Average Benefits Test & Aggregation

15.1 The Average Benefits Test: Nondiscriminatory Classification (Safe/Unsafe Harbor) 15.2 Average Benefit Percentage Test (ABPT) Mechanics & Calculation 15.3 Mandatory Disaggregation, Permissive Aggregation & Line of Business (SLOB) Rules 15.4 Otherwise Excludable Employees: When Disaggregation Rescues a Failing Test

16 Chapter 16: ADP and ACP Testing Fundamentals

16.1 Actual Deferral Percentage (ADP) Test: Eligible Participants & Included Deferrals 16.2 Actual Contribution Percentage (ACP) Test: Matching & After-Tax Contributions 16.3 Testing Standards: The 1.25 Test vs. 2.0 / 2% Spread Test & Prior Year vs. Current Year Elections 16.4 Why ADP and ACP Testing Exists & Which Plans Are Statutorily Exempt 16.5 Shifting Techniques: Moving Contributions Between the ADP and ACP Tests 16.6 Permissive Disaggregation & Restructuring to Pass the ADP and ACP Tests

17 Chapter 17: Correcting Failed ADP/ACP Tests

17.1 Calculating the Total Excess: Ratio Leveling vs. Dollar Leveling to Participants 17.2 Corrective Distributions to HCEs: Refund Calculations, Income Allocations & Withholding 17.3 Alternative Corrections: QNECs, QMACs (Bottom-Up vs. Pro-Rata) & Recharacterization to Catch-Up 17.4 Statutory Deadlines: 2.5-Month Rule, EACA 6-Month Window, §4979 10% Excise Tax & EPCRS Self-Correction 17.5 Switching Between Prior-Year and Current-Year Testing: Advantages, Limits & Anti-Abuse Rules

18 Chapter 18: Top-Heavy Testing & Compliance

18.1 Identifying Key Employees: Officers, 5% Owners & 1% Owners (> $150,000) 18.2 The 60% Top-Heavy Ratio: Determination Date, Valuation Date & Account Adjustments 18.3 Top-Heavy Minimum Contributions (3% Rule), Accelerated Vesting & Safe Harbor Exemption 18.4 Required and Permissive Aggregation Groups & Former Key Employees

19 Chapter 19: Government Reporting & Form 5500 Filings

19.1 Form 5500 Series: Form 5500, Form 5500-SF & Form 5500-EZ Eligibility 19.2 IQPA Independent Audit Threshold: SECURE 2.0 100-Participant Account Balance Rule 19.3 Filing Deadlines, Form 5558 Extensions, EFAST2 Mechanics, DFVC Program & Penalties 19.4 Form 8955-SSA: Reporting Deferred Vested Participants & Related Registration Filings

20 Chapter 20: Participant Disclosures & Statutory Notices

20.1 ERISA Title I Disclosures: SPD, SMM & SAR Timing and Content Requirements 20.2 Fee Disclosures Under ERISA §404(a)(5) & §408(b)(2), Plus Blackout Notices 20.3 Electronic Delivery Safe Harbors (2002 & 2020) & SECURE 2.0 Paper Statement Requirements 20.4 Which Service Providers Must Deliver Fee Disclosures & the Sponsor-Level §408(b)(2) Requirement

21 Chapter 21: ASPPA Professional Conduct & Ethics

21.1 ASPPA Code Overview: Precepts 1 through 6 (Integrity, Competence & Courtesy) 21.2 Conflicts of Interest (Precept 7), Confidentiality (Precept 9) & Work Product Control (Precept 10) 21.3 Professional Discipline, ASPPA Disciplinary Board & Fiduciary Boundary Issues

1.2 Written Plan Documents, Pre-Approved vs. Individually Designed Plans & Restatements

Key Takeaways Explain This Topic AI

Every qualified retirement plan must be established and maintained pursuant to a definitive written instrument executed no later than the last day of the initial plan year.

Pre-approved plans utilize a two-part document architecture consisting of a standardized Basic Plan Document (BPD) housing statutory boilerplate and an Adoption Agreement (AA) for employer plan selections.

Standardized pre-approved plans require mandatory inclusion of all non-excludable employees meeting age 21/1 year of service and safe-harbor formulas without allocation conditions, whereas non-standardized plans permit job exclusions and allocation conditions.

Under Revenue Procedure 2016-37, the IRS eliminated 5-year cyclical determination letter reviews for individually designed plans, restricting Form 5300 submissions to initial qualification, plan termination (Form 5310), and narrow Required Amendments List items.

Pre-approved defined contribution plans operate on recurring 6-year restatement cycles (Cycle 3 ended July 31, 2022); failure to timely execute restatements creates a document failure that requires formal correction under EPCRS.

Last updated: September 2026

1.2 Written Plan Documents, Pre-Approved vs. Individually Designed Plans & Restatements

Note

The Primacy of the Written Document : Under Treasury Regulation §1.401-1(a)(2) and ERISA §402(a)(1), every qualified retirement plan must be established and maintained pursuant to a definitive written instrument. In the world of retirement plan administration, the written document is paramount: a plan cannot operate on oral representations, informal memoranda, or unexecuted draft policies. Operating contrary to the written plan terms constitutes an operational defect, while failing to timely adopt required statutory text constitutes a document defect—both of which threaten qualification.

Retirement plan sponsors must navigate two continuous compliance disciplines: maintaining an up-to-date legal plan document that incorporates all current statutory amendments, and executing operational administration in exact conformity with that document.

Anatomy of Pre-Approved Plans: BPD vs. Adoption Agreement

The vast majority of small- to medium-sized 401(k) plans (over 90% of the U.S. market) are established using IRS pre-approved plan documents sponsored by financial institutions, TPAs, or document providers. A pre-approved plan utilizes a modular, two-part document structure: +-----------------------------------------------------------------------------------+

• | PRE-APPROVED PLAN ARCHITECTURE |
• | |
• | +-----------------------------------+ +------------------------------------+ |
• | | BASIC PLAN DOCUMENT (BPD) | | ADOPTION AGREEMENT (AA) | |
• | | | | | |
• | | • General trust & custodial terms | | • Employer-selected elections | |
• | | • Statutory qualification text | | • Eligibility age & service reqs | |
• | | • Mandatory legal definitions | | • Plan entry dates (semi/monthly) | |
• | | • Vesting schedules & rules | | • Elective deferral & match formula| |
• | | • Distribution provisions | | • Allocation conditions (1,000 hrs)| |
• | | • IRC §415 & §401(a)(17) limits | | • Normal & early retirement age | |
• | | | | • Participant loan parameters | |
• | | [Static across all adopters] | | [Customized by each sponsor] | |
• | +-----------------------------------+ +------------------------------------+ |
• | │ │ |
• | ▼ ▼ |
• | BINDING QUALIFIED PLAN CONTRACT |
• +-----------------------------------------------------------------------------------+
• 1. The Basic Plan Document (BPD)

The BPD is the master legal text containing non-discretionary statutory language, definitions, general trust and custodial administrative terms, top-heavy operational rules, distribution mechanics, and mandatory Code provisions (e.g., §401(a)(9) RMD rules and §415 annual additions limits). The wording in the BPD is identical for every employer that adopts that provider's pre-approved document series.

2. The Adoption Agreement (AA)

The Adoption Agreement is the menu of design elections completed and executed by the individual plan sponsor. It allows the employer to customize:

Eligibility : Minimum age (up to 21) and service conditions (e.g., 1 year or statutory long-term part-time rules);

Entry Dates : Immediate, monthly, quarterly, or semi-annual;

Contributions : Pre-tax deferrals, Roth deferrals, matching contribution tiers, discretionary profit-sharing formulas, or safe harbor contributions;

Allocation Conditions : Requiring 1,000 hours of service during the plan year and/or employment on the last day of the plan year to receive employer profit-sharing;

Vesting Schedules : 3-year cliff, 2-to-6-year graded, or immediate 100% vesting;

Distributions : In-service withdrawals, hardship distributions, rollover distributions, and installment options;

Loans : Whether participant loans are permitted, maximum loan count, and minimum loan thresholds.

Together, the BPD and the signed Adoption Agreement constitute the official, legally binding plan document .

Standardized vs. Non-Standardized Pre-Approved Plans

Pre-approved plans are classified by the IRS into two primary operational categories: Standardized and Non-Standardized . Understanding the structural constraints of each is a frequent ASPPA QKA testing area:

Standardized Pre-Approved Plans

A standardized plan is designed for sponsors who desire minimal administrative complexity and complete certainty regarding nondiscrimination and coverage compliance:

Mandatory Broad Coverage : The plan must cover all employees who meet the statutory age (up to 21) and service (up to 1 year) requirements of IRC §410(a). The employer cannot exclude any job classifications (e.g., hourly employees, salaried employees, or specific divisions), with the sole statutory exceptions of collective bargaining units and non-resident aliens with no U.S.-source income.

No Allocation Conditions : The plan cannot impose allocation conditions on employer contributions. Participants who meet eligibility cannot be required to complete 1,000 hours of service during the plan year or remain employed on the last day of the plan year to receive an employer contribution.

Safe-Harbor Formulas Only : Employer contributions must satisfy uniform design-based safe harbors under IRC §401(a)(4) (e.g., uniform percentage of compensation or permitted disparity). Age-weighted or new comparability formulas are prohibited.

Automatic Coverage Reliance : Because of these structural restrictions, a standardized plan automatically passes IRC §410(b) minimum coverage and §401(a)(4) nondiscrimination without annual testing.

Non-Standardized Pre-Approved Plans

A non-standardized plan provides extensive design flexibility while preserving the cost efficiencies of a pre-approved document:

Class Exclusions Permitted : The employer may exclude specific job categories (e.g., "all hourly employees," "all employees in Division B," or "commissioned sales representatives"), provided the plan passes annual coverage testing under IRC §410(b).

Allocation Conditions Allowed : The employer may condition profit-sharing or matching allocations on completing 1,000 hours of service during the plan year and/or being employed on the last day of the plan year .

Advanced Contribution Designs : Supports custom matching formulas, multi-tiered profit sharing, and integrated permitted disparity.

Mandatory Annual Testing : The plan sponsor must perform annual testing for §410(b) coverage, §401(a)(4) nondiscrimination, and top-heavy compliance.

Plan Feature Standardized Pre-Approved Plan Non-Standardized Pre-Approved Plan Individually Designed Plan (IDP)

Job Class Exclusions Strictly prohibited (except union/nonresident aliens) Permitted (subject to annual §410(b) testing) Completely customizable

Allocation Conditions Prohibited (no 1,000-hr or last-day rules) Permitted (1,000 hours and/or last-day rule) Permitted (any legal condition)

Safe Harbor Design Mandatory uniform design Optional; custom formulas permitted Optional; custom formulas permitted

Annual Coverage Testing Deemed satisfied automatically Mandatory annual testing under §410(b) Mandatory annual testing under §410(b)

IRS Opinion / Det. Letter Automatic reliance on Provider Opinion Letter Automatic reliance on Provider Opinion Letter Must file Form 5300 (limited availability)

• Relative Setup Cost Low Low to Moderate High (attorney-drafted)
• Individually Designed Plans & The Reformed IRS Determination Letter Program

An Individually Designed Plan (IDP) is drafted by an ERISA attorney from scratch for a single employer. IDPs are typically utilized by large corporations, complex controlled groups, or employers requiring unique benefit structures (such as hybrid cash balance designs with complex floor-offset arrangements).

The Historical 5-Year Cycles and Revenue Procedure 2016-37

Prior to 2017, the IRS maintained a staggered 5-year cyclical determination letter program for individually designed plans (Cycles A through E, determined by the last digit of the employer's EIN). Under that system, plan sponsors submitted their complete plan to the IRS on Form 5300 every five years to obtain a fresh Determination Letter confirming that the document satisfied all recent tax law changes.

Effective January 1, 2017, IRS Revenue Procedure 2016-37 eliminated the 5-year cyclical determination letter program for individually designed plans. Under current rules (reaffirmed in Rev. Proc. 2023-4 and subsequent annual guidance), an individually designed plan sponsor may submit Form 5300 for a determination letter only under three narrow circumstances :

Initial Plan Qualification : When the plan is first established and adopted;

Plan Termination : When the plan is formally terminated, using Form 5310 (Application for Determination for Terminating Plan);

Special Specified Circumstances : Narrow industry-specific situations periodically announced by the IRS in its annual Required Amendments List (RAL) .

Because routine determination letters are no longer available every five years, sponsors of individually designed plans bear ongoing responsibility for monitoring legislative updates and drafting timely interim amendments.

IRS 6-Year Pre-Approved Restatement Cycles

While individually designed plans lost their 5-year review cycles, pre-approved plans continue to operate on recurring 6-year restatement cycles administered by the IRS. The IRS staggers these cycles between Defined Contribution (DC) and Defined Benefit (DB) plans: +-----------------------------------------------------------------------------------+

• | IRS 6-YEAR PRE-APPROVED RESTATEMENT CYCLE WORKFLOW |
• | |
• | Phase 1: Provider Submission |
• | Pre-approved document providers draft master BPD & AA based on the |
• | IRS Cumulative List of Qualification Changes and submit them to the IRS. |
• | │ |
• | ▼ |
• | Phase 2: IRS Technical Review & Opinion Letter Issuance |
• | The IRS reviews documents for statutory compliance and issues an |
• | official Opinion Letter approving the master document series. |
• | │ |
• | ▼ |
• | Phase 3: The 2-Year Employer Adoption Window |
• | Adopting employers have a mandatory 2-year window to restate their |
• | existing plans by executing the freshly approved Adoption Agreement. |
• +-----------------------------------------------------------------------------------+
• Defined Contribution Cycle Milestones

Cycle 1 (EGTRRA Restatements) : Addressed the Economic Growth and Tax Relief Reconciliation Act of 2001; employer adoption window closed April 30, 2010.

Cycle 2 (PPA Restatements) : Addressed the Pension Protection Act of 2006; employer adoption window ran from May 1, 2014, to April 30, 2016.

Cycle 3 DC Restatements : Evaluated under the 2017 Cumulative List. The IRS issued Opinion Letters on June 30, 2020. The mandatory two-year employer adoption window opened August 1, 2020, and closed on July 31, 2022 .

Cycle 4 DC Restatements : Currently in development; will incorporate statutory changes from the SECURE Act of 2019, CARES Act of 2020, and SECURE 2.0 Act of 2022.

Important

The Consequence of Missing the Cycle Deadline : If an employer fails to execute a Cycle 3 restatement by the July 31, 2022 deadline, the plan loses its pre-approved status . It is immediately treated by the IRS as an unamended individually designed plan with a disqualifying document failure, requiring formal correction under the Employee Plans Compliance Resolution System (EPCRS).

Interim Amendments vs. Discretionary Amendments

Between 6-year master restatements, Congress and regulatory agencies continually modify retirement legislation. Plan documents must be updated through interim amendments and discretionary amendments :

1. Interim Amendments (Mandatory Statutory Changes)

An interim amendment is required to update plan terms for mandatory changes in federal law (e.g., changes under SECURE 2.0 such as increasing the RMD age to 73, or mandatory automatic enrollment provisions).

Statutory Due Date : An interim amendment must generally be adopted by the employer's tax return filing due date (including extensions) for the taxable year in which the statutory change becomes effective.

Legislative Relief Extensions : Congress frequently extends the amendment deadline for major legislation. For example, Section 501 of the SECURE 2.0 Act of 2022 extended the formal plan amendment deadline for provisions under SECURE 1.0, the CARES Act, and SECURE 2.0 to December 31, 2026 (or later for collectively bargained and governmental plans), provided the plan operates in operational compliance with the statutory rules as of their effective dates.

2. Discretionary Amendments (Optional Plan Design Changes)

A discretionary amendment is initiated by employer choice to alter optional plan features (e.g., adding a Roth 401(k) feature, increasing matching formula from 50% to 100%, changing eligibility from age 21 to age 18, or adding loan availability).

Deadlines : A discretionary amendment must be formally adopted by the end of the plan year in which the amendment is effective .

IRC §411(d)(6) Anti-Cutback Rule : A plan amendment cannot retroactively reduce, eliminate, or restrict accrued benefits, early retirement subsidies, or optional forms of benefit . Therefore, any discretionary amendment that reduces future benefit accruals, tightens vesting schedules, or reduces an employer matching formula must be adopted prospectively before the compensation or service is earned .

Operational vs. Document Failures: EPCRS Overview

When a plan violates qualification requirements, it must be remediated through the Employee Plans Compliance Resolution System (EPCRS) , governed by Revenue Procedure 2021-30 (as expanded by Section 305 of SECURE 2.0). EPCRS identifies four categories of failures:

Document Failure : A plan document defect resulting from the absence of required statutory language or the failure to timely execute a required restatement or interim amendment.

Operational Failure : The plan document satisfies all legal requirements, but plan administrators fail to follow the written terms in actual day-to-day operations (e.g., failing to enroll an eligible employee, miscalculating matching allocations, or exceeding §415 limits).

Demographic Failure : The plan fails statutory coverage under IRC §410(b), nondiscrimination under §401(a)(4), or minimum participation under §401(a)(26).

Employer Eligibility Failure : An employer adopts a retirement plan type it is not legally permitted to sponsor (e.g., a commercial for-profit corporation adopting a 403(b) plan).

The Three EPCRS Correction Programs +-----------------------------------------------------------------------------------+

• | EPCRS RESOLUTION PATHWAYS |
• | |
• | [ SELF-CORRECTION PROGRAM (SCP) ] |
• | • No IRS submission, no user fee, no IRS contact. |
• | • Available for operational failures (insignificant anytime; significant |
• | within 3 years of failure year). |
• | • SECURE 2.0 §305 expanded SCP to "eligible inadvertent failures" including |
• | certain loan errors and document failures if corrected in reasonable time. |
• | |
• | [ VOLUNTARY CORRECTION PROGRAM (VCP) ] |
• | • Voluntary formal submission to IRS via Pay.gov (Form 8950) prior to audit. |
• | • Fixed user fee based on plan assets ($1,500 to $3,500). |
• | • Full IRS review resulting in a binding, legally enforceable Compliance Stmt. |
• | |
• | [ AUDIT CLOSING AGREEMENT PROGRAM (AUDIT CAP) ] |
• | • Failure discovered by the IRS during an active examination. |
• | • Negotiated closing agreement; sanction based on Maximum Payment Amount (MPA). |
• | • Substantially more punitive than VCP fees. |
• +-----------------------------------------------------------------------------------+
• Common ASPPA QKA Exam Traps

Exam Trap 1: The 'Standardized Plan Exclusion' Trick : Exam questions describe an employer adopting a standardized pre-approved plan who wants to exclude "all hourly paid workers" or require "1,000 hours of service to get profit-sharing." Standardized plans strictly prohibit job category exclusions and allocation conditions . If an employer wants to exclude classes or impose allocation conditions, they must adopt a non-standardized plan.

Exam Trap 2: Believing Individually Designed Plans Have 5-Year Cycles : Rev. Proc. 2016-37 permanently eliminated 5-year cyclical determination letter submissions for individually designed plans. Questions asking about a plan submitting Form 5300 on a 5-year cycle reflect obsolete law; currently, only initial qualification, termination (Form 5310), or RAL-designated events qualify.

Exam Trap 3: Discretionary Amendment Effective Dates : Candidates often assume discretionary amendments can be adopted retroactively like interim statutory amendments. Discretionary amendments that reduce benefits violate IRC §411(d)(6) anti-cutback rules if adopted after benefits are accrued; they must be prospective.

Exam Trap 4: Cycle 3 DC Restatement Deadline : The official IRS Cycle 3 pre-approved restatement window for defined contribution plans ended on July 31, 2022 . Missing this date means the employer is a non-amender with a document failure.