Close
Close

IRS updates safe harbor rules for rollover distributions

RFP
Tax Hot Topics newsletter In Notice 2018-74, the IRS modified two safe harbor explanations previously provided in Notice 2014-74 that can be used to satisfy the requirement under Section 402(f) that certain information be provided to retirement plan recipients of eligible rollover distributions. Under Section 402(f), the plan administrator of a qualified employer plan is required to provide a written explanation to any recipient of an eligible rollover distribution, including Section 401(a) qualified plans, Section 403(a) plans, governmental Section 457(b) plans and Section 403(b) plans. Notice 2014-74 contains one safe harbor explanation for payments not from a designated Roth account, and one safe harbor explanation for payments from a designated Roth account. Plan administrators and payers may use these explanations to satisfy Section 402(f) to the extent that the explanations accurately reflect current law.

Notice 2018-74 updates the safe harbor explanations in Notice 2014-74 for changes in the law occurring after Dec. 8, 2014, including the following:

  1. The extended rollover deadline for qualified plan loan offset amounts under the Tax Cuts and Jobs Act
  2. The exception to the 10% additional tax under Section 72(t) for phased retirement distributions to certain federal retirees
  3. The expanded exception to the 10% additional tax under Section 72(t) for early distributions from a governmental retirement plan for specified federal employees who have reached age 50
  4. The self-certification procedures under Rev. Proc. 2016-47 for claiming eligibility for a waiver of the 60-day deadline for making rollovers.

In addition, Notice 2018-74 provides specific instructions for amending the safe harbor explanations in Notice 2014-74 to reflect the changes. Plan administrators and payers may use the updated safe harbor explanations to satisfy Section 402(f). However, the updated safe harbor explanations will not satisfy Section 402(f) to the extent the explanations are no longer accurate due to a change in the relevant law occurring after Sept.18, 2018.

Contacts
Jeff Martin
Partner, Washington National Tax Office
T +1 202 521 1526

Keith Mong
Managing Director, Washington National Tax Office
T +1 202 521 1554

James Sanchez

Senior Associate, Washington National Tax Office
T +1 202 861 4107

Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.