Compliance Spotlight: New Rollover Notice and Disaster Relief


Updated language for required participant distribution notices has been issued by the IRS. Participants who meet the plan requirements to receive an eligible rollover distribution are required to receive a notice describing the rollover options and the tax consequences of receiving a taxable distribution. The IRS, in Notice 2018-74, updated the model notices for the first time in four years. Plan sponsors who provide the updated notices will be considered in compliance with the requirements of Internal Revenue Code Section 402(f).

The updated 402(f) notices are divided into two versions: one for participants with a designated Roth account and one for non-Roth accounts. The new notices provide updated information regarding the extension of the 60-day rollover rule for loan offsets and for the guidance on participant self-certification for rollovers deposited beyond the 60-day period. Also included is new information on the early distribution tax and disaster relief.

A key takeaway from these new updates is that sponsors should not rely on old notices. Providing participants with the most up-to-date notices is an important protection for plan sponsors and participants to keep the plan and rollovers tax-qualified.

Victims of recent disasters, whether from fire, hurricanes, tornadoes, or flooding, experience profound turmoil in all aspects of their life, including with respect to their financial records and responsibilities. The IRS recognizes that plan sponsors and plan participants often lose some or all of their records during such catastrophes, and therefore provides relief from filing deadlines and FAQs on how to gather benefit information. There is guidance specific to each federally declared disaster area regarding tax filing relief and for victims who are beneficiaries of qualified plans:

https://www.irs.gov/newsroom/tax-relief-in-disaster-situations

For questions or more information, please contact Richard Green at rgreen@windes.com or (844) 252-7337.

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