What is a GUST Restatement
GUST restatement refers to an Internal Revenue Service requirement that companies offering specific retirement savings plans adjust how they accounts are administered. As a result of changes to tax law in the United States, employers and retirement plan sponsors are required to complete new adoption agreements and restate their prototype qualified plans. In order for plans to maintain their qualified status, they must meet different statutory regulations.
BREAKING DOWN GUST Restatement
GUST restatement derives its acronym from the combination of several specific tax regulations that contained changes for how retirement plans could be administered. These included General Agreements on Tariffs and Trade (GATT), the Uniformed Services Employment Rights Act of 1994 (USERRA), the Small Business Job Protection Act of 1996 (SBJPA) and the Taxpayer Relief Act of 1997 (TRA '97).
The IRS required most businesses offering certain retirement savings plans, notably 401(k)s, to revise the explanatory documents related to the plans, restating their policies around plan administration and re-submit then with the agency by January 31, 2004. The aim was to ensure the employers' plans were in compliance with those rules.
In addition to the main four regulations that composed the GUST acronym, the restatement also sought to update plans to comply with two other rules: IRS Restructuring and Reform Act of 1998 (RRA '98) and the Community Renewal Tax Relief Act of 2000 (CRA).
Concurrent with GUST restatement, IRS also required that qualified retirement plans be restated to show their compliance with EGTRRA, the Economic Growth and Tax Relief Reconciliation Act of 2001.
Reasons for requiring GUST Restatement
As pension advisor Mark Shafer explained, the changes around GUST and EGTRRA affected employees as well as employers.
They tax laws allowed employers to receive tax credits for starting retirement plans and educating their employees about those plans; get higher deductible amounts for contributions to their plans; receive higher benefits at retirement.
The laws also meant that employees could get tax credits for contributing toward retirement; make catch-up contributions if they're aged 50 or over; take smaller required distributions from their IRAs; and make larger contributions to their 401(k) plans.
Shafer explained that if employers didn't submit GUST restatement, "the plans could lose their tax-favored status. The loss of tax-favored status could cause a loss of deductibility for the employer’s contributions to the plan."
He added that a plan restatement generally superseded prior versions of the plan, "including all amendments thereto, as of the effective date of the restatement. However, in the event a GUST restatement is treated as superseding previously adopted EGTRRA amendments because the restatement does not incorporate or reflect the amendments, the restatement may result in the plan not being operated in accord with its terms, decrease or eliminate accrued benefits in violation of the anti-cutback rules, or otherwise fail a qualification requirement."