IRS Updates Safe Harbor Notice Regarding Eligible Rollover Distributions
Updated: Oct 2
Under the Internal Revenue Code, retirement plans must provide a written notice with an explanation of tax consequences to participants within a reasonable period of time (30 to 180 days) prior to making a payment that would qualify as an eligible rollover distribution. In the past, the IRS has provided model safe harbor notices on which plan administrators can rely in order to comply with the requirement. In late August, the IRS issued Notice 2020-62, which updates the model safe harbor notices.
The new model incorporates the exception to the 10% additional tax under for qualified birth or adoption distributions, implemented by the SECURE Act. The updated model also recognizes the increase in the required beginning date from age 70 ½ to age 72. Additionally, the new safe harbor contains minor modifications to improve clarity, such as adding that payments of certain premiums for health and accident insurance are not eligible rollover distributions.