IRS Updates Safe Harbor Notices for Eligible Rollovers

On August 6, 2020, the IRS released Notice 2020-62, providing updates to the safe harbor explanations that are provided when a participant is eligible to take a rollover distribution from their retirement plan. As background, the IRC requires plan administrators to provide terminating participants with a written explanation discussing their options for rolling over account balances to another account and the related tax consequences of doing so. Participants must receive this type of explanation within a reasonable period of time before making an eligible rollover distribution.

The notice updates the safe harbor explanations to reflect a number of changes that have been made to retirement regulations under the Setting Every Community Up for Retirement Enhancement (SECURE) Act and the Coronavirus Aid, Relief and Economic Security (CARES) Act. Specifically, the explanations were updated to add the increased age for required minimum distributions and the tax treatment of birth or adoption distributions, and to clarify that a CARES Act distribution is not an eligible rollover for certain purposes.

Two updated safe harbor explanations are included as appendixes in the notice — one for payments that are from a designated Roth account and one for payments that are not from a designated Roth account. As always, plan administrators can update the samples to indicate their specific plan terms.

Notices 2020-62 »