What is the function of a plan amendment in a 401(k) plan?

The function of a plan amendment in a 401(k) plan is to formally change the plan document rules. A plan amendment is a necessary process to update the plan's provisions to reflect changes in laws, regulations, or the sponsor’s goals, ensuring that the plan remains compliant and aligned with the employer's intentions. By amending the plan document, the plan sponsor accurately reflects any adjustments made regarding eligibility, contribution limits, investment options, or distribution rules.

While notifying participants of their account balances, summarizing employee contributions, and evaluating investment performance are important aspects of plan administration, they do not involve altering the actual rules or provisions of the plan document. In contrast, a plan amendment specifically addresses changes to the governing document of the 401(k) plan itself, which is fundamental for maintaining the plan's legal status and operational integrity.