March 20, 2023

Volume XIII, Number 79


March 17, 2023

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Post-Secure Act, Is Your Special Tax Notice Up to Date?

As part of our recent newsletter regarding the passage of the SECURE Act (here), we noted that, effective as of January 1, 2020, the age for determining the required beginning date for required minimum distributions (RMDs) increased from age 70 ½ to age 72. Additionally, plan sponsors have the discretion to permit in-service distributions for birth or adoption related expenses, subject to certain limitations.

One side effect of these changes that a plan sponsor may not have considered is that they likely require updates to their plan's special tax notice (or 402(f) notice). The special tax notice is required to be furnished to any recipient of an eligible rollover distribution and summarizes tax considerations with respect to electing whether to rollover such a distribution to an IRA or qualified retirement plan.

The IRS model special tax notice was last updated by Notice 2018-74, prior to the passing of the SECURE Act, and a new model notice has not yet been issued. However, a diligent plan sponsor should consider updating their notice for the following:

  • The model notice specifically references the RMD age of 70 ½ in a number of places. These references should be updated to reflect the increase to age 72 for those participants who attain age 70 ½ after December 31, 2019.

  • Additionally, the model notice lists those instances where the 10% additional tax on early distributions does not apply to a distribution that is not rolled over. As the inservice birth or adoption distribution added by the SECURE Act is not subject to the 10% excise tax, a plan sponsor may want to consider adding such distributions to this list, especially if the plan sponsor amends its qualified retirement plan to permit such distributions. Note, however, that in our experience, plan sponsors are generally waiting to add this feature to their plans until the IRS issues additional guidance on the administration of the birth or adoption distribution.

In light of these changes, plan sponsors should ask their third party administrators (or whomever prepares their plan's special tax notice) to update the special tax notice for their plan, if they have not already done so.

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About this Author

Al Ward Executive Compensation Hill Ward Henderson

Al is Co-Chair of the firm's Executive Compensation & Employee Benefits practice. Al is recognized throughout the professional community for his depth of experience and knowledge in the employee benefits area. Prior to entering the practice of law, Al was an actuarial and employee benefits consultant for over eight years.

Al has focused for over four decades on executive compensation, employee benefits, trusts and taxation. He represents many clients including publicly traded and privately held, taxable or tax-...

Kirsten Vignec Employee Benefits Attorney HIll Ward Henderson

Kirsten is a Shareholder in the firm's Corporate & Tax Group and practice co-chair of the Executive Compensation & Employee Benefits Group. Kirsten’s practice involves employee benefit matters associated with the design and ongoing administration of executive deferred compensation plans, welfare benefit plans, Section 401(k) plans, profit sharing plans, and pension plans. Kirsten represents tax-exempt entities, for-profit, private, and publicly-traded companies.

Kirsten represents clients before the IRS, DOL, and the PBGC with respect to employee benefits matters.


Bret Hamlin employee benefit lawyer Hill Ward Henderson

Bret is a Shareholder in the firm’s Executive Compensation & Employee Benefits Group. He practices primarily in the areas of employee benefits, deferred compensation and trusts. Prior to entering the private practice of law, he provided plan design and consulting, third-party administration and investment, as well as retirement plan education services for clients. 

Bret represents large, medium and small employers with respect to many employee benefit matters, including both single employer and multiple employer qualified retirement plans, deferred...

Timothy P Zehnder employee lawyer Hill Ward Henderson

Tim is an Associate in the firm’s Executive Compensation & Employee Benefits Group. His practice focuses primarily on advising client employers (private and public, tax-exempt and for-profit) on a wide variety of compensation and benefits matters, including plan design, administration and termination, compliance with applicable laws (including the Internal Revenue Code, ERISA, HIPAA, and the Affordable Care Act), and resolution of compliance issues with the Internal Revenue Service, Department of Labor and Pension Benefit Guaranty Corporation.  Tim has experience assisting...

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