IRS issues updated 402(f) rollover distribution notices

The IRS has issued new model notices for recipients of rollover distributions from qualified retirement plans. The updated notices reflect changes from the 2017 tax reform act, as well as regulatory changes enacted since previous versions of the notices were published.

The model notices provide a safe harbor for complying with the Section 402(f) requirement to provide certain information to participants before they receive an eligible rollover distribution. Plan administrators must provide 402(f) notices to participants in 401(k) and other qualified plans, 403(b) plans, and governmental 457(b) plans when the participant may elect a lump sum distribution or installments payable over less than 10 years. The notice is not given for required minimum distributions, hardship distributions, or when the only distribution options are a series of substantially equal installments paid over at least 10 years or the life of the participant and/or beneficiary. The notices include information about rollover options, tax implications, and deadlines.

All employers sponsoring covered retirement plans should begin using the new model notices (or update their existing notices) as soon as possible. The model notices are found in IRS Notice 2018-74, which also includes a sentence-by-sentence guide to updating notices based on previous models, for plan administrators that don’t wish to adopt the new models.