The IRS announced two revised safe harbor rollover notices that are deemed to be compliant with the qualified retirement plan rollover notice requirements under Internal Revenue Code ("Code") Section 402(f). The revised notices will be published September 28, 2009 in Notice 2009-68 of Internal Revenue Bulletin 2009-39. The new notices formally replace the IRS' prior safe harbor rollover notice beginning January 1, 2010, but plan administrators can begin using the new notices now.
Plan administrators are required to provide a written explanation of the federal income tax consequences of eligible retirement plan distributions to participants, beneficiaries and alternate payees who receive an eligible rollover distribution. The new notices have a clearer format and broader content reflecting legislative changes, including new rules added by the Pension Protection Act of 2006. Important changes include information regarding distributions to nonresident aliens and nonspouse beneficiaries, and the ability to roll over distributions into a Roth IRA.
Two separate notices are provided: one for distributions from a designated Roth account, and one for non-Roth account distributions. If an eligible rollover distribution includes a distribution from both types of retirement plan accounts, then the recipient should receive both notices. The notices can be customized to fit the plan terms.
Although use of a safe harbor notice is not required, plan administrators should consider using the safe harbor notice because its form is deemed to be compliant with Code Section 402(f), which eliminates any uncertainty that may exist with other formats.
Regardless of whether a safe harbor notice is used, plan administrators should review their plan's current Code Section 402(f) notices and update them for compliance before January 1, 2010.