The IRS recently published new guidance on the tax withholding and reporting consequences associated with qualified retirement plan distributions to state unclaimed property funds.  In Revenue Ruling 2020-24, the IRS clarified that distributions from qualified retirement plans to state unclaimed property funds are subject to both federal income tax withholding and 1099-R reporting requirements.  In a companion revenue procedure, Rev. Proc. 2020-46, the IRS permitted taxpayers to self-certify for a waiver of the 60-day deadline for rolling over funds between qualified plans when the funds had been distributed to a state unclaimed property fund.

Continue Reading IRS Updates Guidance on Qualified Plan Distributions to State Unclaimed Property Funds

The IRS recently released Notice 2020-62, which updates the safe harbor explanations that may be used to satisfy the  notice requirement for eligible rollover distributions, also referred to as the “Safe Harbor Notices.”  These changes to the Safe Harbor Notices take into account recent statutory changes brought about by the Setting Every Community Up for Retirement Enhancement (“SECURE”) Act of 2019 and the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.

What are the § 402(f) Safe Harbor Notices?

Under § 402(f) of the Code, plan administrators of certain retirement plans are required to provide a written explanation to any recipient of an eligible rollover distribution.  This notice must be provided by 401(k) plans and other qualified plans, 403(b) plans and 457(b) governmental plans within a reasonable period of time before the distribution is to made — generally at least 30 days unless otherwise elected by the recipient.  To assist plan administrators in satisfying this notice requirement, the IRS has published and continues to update two versions of its Safe Harbor Notice, one for distributions from a designated Roth account, and one for distributions from non-Roth accounts.

Plan administrators may satisfy the § 402(f) notice requirement by relying on the Safe Harbor Notices, although they are not required to do so.

What Changes Have Been Incorporated Into the New § 402(f) Safe Harbor Notices?

The Safe Harbor Notices have been revised to reflect the following statutory changes adopted by the SECURE Act and by the CARES Act:


Continue Reading What You Need to Know About the New SECURE Act and CARES Act Updates to the § 402(f) Safe Harbor Rollover Notice

During a participant’s lifetime, required minimum distributions (“RMDs”) from a defined contribution plan are relatively small in size.  Less favorable treatment may apply after the participant’s death, depending on the distribution options offered by the plan, the form of distribution elected by the participant, the age of the beneficiary and the relationship between the participant and the beneficiary.

Surviving spouses can take advantage of a special rule that permits them to create spousal rollover IRAs, which effectively allow the surviving spouse to treat the benefit as if he or she was a participant in the plan.  This treatment allows the surviving spouse to elect a longer payout and to designate a beneficiary who may also be eligible for an extended distribution period.


Continue Reading Reducing Required Minimum Distributions from a Defined Contribution Plan: The Spousal Rollover IRA