The Treasury Department and the IRS issued Notice 2026-13 on Jan. 15 that provides two safe harbor explanations that retirement plan administrators can use to satisfy the requirement under Section 402(f) of the tax code to provide certain information to recipients of eligible rollover distributions.
The guidance modifies the safe harbor explanations previously provided in Notice 2020-62.
In Notice 2026-13, the first safe harbor explanation applies to non-Roth accounts, and the second safe harbor explanation applies to Roth accounts.
The modifications to the safe harbor explanations take into consideration certain legislative changes made by the SECURE 2.0 Act of 2022 and implement a recommendation from the U.S. Government Accountability Office, the IRS said.
The notice also addresses, among other things, changes to the 10% additional tax on early withdrawals from retirement plans, the required minimum distribution rules for surviving spouses, and the increased age for determining required beginning dates for required minimum distributions.
In a blog post, Thomson Reuters provides a refresher on some of the Secure 2.0 clarifications addressed by Notice 2026-13:
- 10% Tax on Early Distributions. The explanations reflect exceptions to the 10% tax on early distributions added by the SECURE 2.0 Act, including distributions for emergency personal expenses, to domestic abuse victims, or to terminally ill individuals; and other distributions such as qualified disaster recovery distributions and certain distributions to public safety employees and private sector firefighters.
- Required Minimum Distributions (RMDs). The notices no longer expressly reference the age for determining a participant’s required beginning date for RMDs, which has increased to age 73 (and will later increase to age 75). They also reflect changes to the RMD rules for surviving spouses and the elimination of RMDs with respect to designated Roth accounts.
- Cash-Out Amount. The explanations reflect the increase, to $7,000, in the dollar threshold below which a plan may make an immediate lump-sum distribution without participant consent following a distribution event. This threshold also applies for purposes of the rules regarding automatic rollover of mandatory distributions.
- Pension-Linked Emergency Savings Accounts (PLESAs). An explanation of special rules applicable to individuals receiving payment from a PLESA has been added to the notice for rollovers from designated Roth accounts.
Plan administrators may customize these safe harbor explanations as appropriate, the IRS said. For instance, if the plan does not hold after-tax employee contributions, the plan administrator could eliminate that section of the safe harbor explanation.
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