Background on the rollover notice requirement

The Internal Revenue Code (IRC) requires qualified plans under section 401(a), annuity plans under section 403(a) and 403(b) and governmental 457(b) plans to provide participants with a notice within a reasonable time prior to making a distribution that may be rolled over (an “eligible rollover distribution”). The eligible rollover notice is also known as the 402(f) notice.

Eligible rollover distributions generally include lump-sum distributions and some installment payments. No notice is required for annuity payments, which are generally not eligible rollover distributions.

Most plan administrators use an IRS-issued safe-harbor notice. The last safe-harbor notice, which was issued in 2020 (Notice 2020-62), technically was a safe harbor only if it was updated for changes in law.

The new model notices for eligible rollover distributions

IRS Notice 2026-13 contains up-to-date safe-harbor notices.

Most of the updates in the eligible rollover notices reflect changes made by the SECURE laws: the 2019 SECURE Act and SECURE 2.0 Act of 2022 (SECURE 2.0). In addition to including the new notices, Notice 2026-13 discusses these changes and which ones require the eligible rollover notice.

The biggest changes made by the SECURE laws are the rules governing required minimum distributions (RMDs). The RMD beginning ages are increased; Roth accounts in plans are no longer required to make RMDs; and plans can increase the amount of the involuntary lump sum to $7,000. (For more information, see our July 25, 2024 insight, “Treasury Guidance on Retirement Plan RMDs.”)

The SECURE laws included new distribution opportunities that plans can add without violating distribution restrictions. Many of the new provisions include exceptions to the 10 percent premature distribution tax. About half of them also include an exception to the eligible rollover notice. These include:

• Distributions for emergency personal expenses
• Distributions to domestic abuse victims
• Qualified disaster recovery distributions
• Pension-linked emergency savings account (PLESA) distributions
• Qualified distributions for long-term care

In response to recommendations from the U.S. Government Accountability Office, the IRS has made the new model notices easier for participants to read and is urging plans to make each notice available as soon as possible before the distribution date so the participant can make educated decisions about whether to receive or roll over the distribution.

As was the case with the earlier safe-harbor notice, the new notices technically will not be a safe harbor once the law changes. In that case, plan administrators can keep safe harbor status by updating the notice for changes in law that affect the notice.

Next steps for plan administrators

Plan administrators that use the safe-harbor notice should switch to the new model notices as soon as possible.

Plan administrators that do not use the safe-harbor notice should reconsider that decision, especially now that there are new model notices.