Close
Close

Section 402(f) safe harbor explanations updated

RFP
Tax Hot Topics newsletter The IRS has issued Notice 2020-62 to provide updates to the Section 402(f) safe harbor explanations.

The guidance modifies the safe harbor explanations previously provided in Notice 2018-74, reflecting legislative changes made after Oct. 1, 2018, including 1) the exception to the 10% additional tax under Section 72(t) for qualified birth or adoption distributions, and 2) the increase from age 70 ½ to age 72 for minimum required distributions for employees born after June 30, 1949.

Section 402(f) requires qualified retirement plans and certain other tax-favored plans (e.g., 403(b) and governmental 457(b) plans) to provide certain information to recipients of eligible rollover distributions, and the notice includes two model safe harbor explanations for this purpose – one for distributions that are not from a designated Roth account, and the other for distributions from a designated Roth account.

The notice also confirms that COVID-19-related distributions that were added by the Coronavirus Aid, Relief and Economic Security (CARES) Act are not eligible rollover distributions, and therefore, qualified retirement plans are not required to provide a Section 402(f) notice to recipients of such distributions. A coronavirus-related distribution is any distribution from an eligible retirement plan made on or after Jan. 1, 2020, and before Dec. 31, 2020, to a qualified individual. These distributions receive special tax treatment, including not being subject to the 10% additional tax under Section 72(t). They may also be included in taxable income ratably over a three-year period and may be recontributed to an applicable eligible retirement plan.

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

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

James Sanchez
Senior Associate
Washington National Tax Office
+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.