SECURE Act Update: Revisions to Model Rollover Notices

Although the landmark legislation will take years before it is fully implemented, many of the provisions are already in effect—including two that require immediate changes to the 402(f) notice given to participants to help them understand their rollover options.

As part of its continuing effort to aid industry compliance with the Setting Every Community Up for Retirement Enhancement (SECURE) Act, the SPARK Institute is making available a redraft of its model 402(f) notice.

Under the laws governing tax-qualified retirement plans, the 402(f) notice is required to be given to participants to help them understand their rollover options. Passed late last year, the SECURE Act made a number of changes to federal tax laws that affect the information on the 402(f) notice. 

“We were strong supporters of the SECURE Act, which accomplished a number of key SPARK Institute priorities,” says Tim Rouse, SPARK Institute executive director. “Although the law will require a lot of work, and many of the provisions went into effect almost immediately, we have already rolled up our sleeves to assist the industry and retirement savers.” 

As Rouse explains, retirement plans are required to provide a “rollover notice,” also called a “402(f) notice” or “special tax notice,” whenever a participant in a plan takes a distribution that can be rolled over. The notice explains the options available to the individual, and the tax consequences of not rolling over the distribution into another qualified plan or individual retirement account (IRA). 

The suggested edits, developed by SPARK Institute’s government relations committee, are available on SPARK’s website. The revised document has not been approved by the IRS, but has been sent to regulators as part of the SPARK Institute’s ongoing efforts to provide input as the Department of the Treasury, IRS and the Department of Labor (DOL) develop regulations and guidance under the SECURE Act.

The revised model rollover notice stretches to nearly 20 pages, but only a few edits have been made. In several places, language has been inserted to reflect that the age for taking required minimum distributions (RMDs) has been increased to 72. The revised document also includes newly inserted language explaining in various places that no excise tax will be assessed on payments of up to $5,000 made to an individual from a defined contribution (DC) plan within one year after the birth or adoption of a child.