Source: https://www.irs.gov/irb/2014-50_IRB/ar09.html
Timestamp: 2017-06-23 01:39:15
Document Index: 20075273

Matched Legal Cases: ['§ 402', '§ 401', '§ 402', '§ 402', '§ 403', '§ 403', '§ 457', '§ 457', '§ 403', '§ 403', '§ 402', '§ 402', '§ 402', '§ 402', '§ 1', '§ 1', '§ 1', '§ 402', '§ 402', '§ 402']

Internal Revenue Bulletin - December 8, 2014 - Notice 2014–74
Internal Revenue Bulletin: 2014-50 December 8, 2014 Notice 2014–74
Safe Harbor Explanations – Eligible Rollover Distributions
III. AMENDMENTS TO THE SAFE HARBOR EXPLANATIONS
Part A – Amendments to the Safe Harbor Explanation for Payments not from a Designated Roth Account
Part B – Amendments to the Safe Harbor Explanation for Payments from a Designated Roth Account
Where may I roll over the payment?
If I don’t do a rollover, will I have to pay the 10% additional income tax on early distributions?
If I do a rollover to an IRA, will the 10% additional income tax apply to early distributions from the IRA?
If your payment includes after-tax contributions
If you miss the 60-day rollover deadline
If your payment includes employer stock that you do not roll over
If you have an outstanding loan that is being offset
If you were born on or before January 1, 1936
If your payment is from a governmental section 457(b) plan
If you are an eligible retired public safety officer and your pension payment is used to pay for health coverage or qualified
If you roll over your payment to a Roth IRA
If you are not a plan participant
If you are a nonresident alien
If I do a rollover to a Roth IRA, will the 10% additional income tax apply to early distributions from the IRA?
If you receive a nonqualified distribution and you were born on or before January 1, 1936
If you receive a nonqualified distribution, are an eligible retired public safety officer, and your pension payment is used
to pay for health coverage or qualified long-term care insurance
I. PURPOSE This notice amends the two safe harbor explanations in Notice 2009–68, 2009–2 C.B. 423, that can be used to satisfy the requirement
under § 402(f) of the Internal Revenue Code (“Code”) that certain information be provided to recipients of eligible rollover
distributions. Amendments to the safe harbor explanations reflected in this notice relate to the allocation of pre-tax and
after-tax amounts, distributions in the form of in-plan Roth rollovers, and certain other clarifications to the two safe harbor
explanations. The amendments to the safe harbor explanations (and attached model notices) may be used for plans that apply
the guidance in section III of Notice 2014–54, 2014–41 I.R.B. 670, with respect to the allocation of pretax and after-tax
Section 402(f) requires the plan administrator of a plan qualified under § 401(a) to provide the written explanation described
in § 402(f)(1) to any recipient of an eligible rollover distribution, as defined in § 402(c)(4). In addition, §§ 403(a)(4)(B)
and 457(e)(16)(B) require the plan administrator of a § 403(a) plan, or an eligible § 457(b) plan maintained by a governmental
employer described in § 457(e)(1)(A), to provide the written explanation to any recipient of an eligible rollover distribution.
Further, § 403(b)(8)(B) requires a payor under a § 403(b) plan to provide the written explanation to the recipient of an eligible
rollover distribution.
Notice 2009–68 contains two safe harbor explanations that reflect the relevant law as of September 28, 2009: one explanation
is for payments not from a designated Roth account and the other explanation is for payments from a designated Roth account.
These explanations include rules on the rollover of payments to Roth IRAs, including explanations of transition rules that
only applied to distributions made before 2011. Notice 2009–68 provides that the safe harbor explanations can be used by plan
administrators and payors to satisfy § 402(f) to the extent the explanations accurately reflect current law.
Section 402A(c)(4), which was added to the Code by the Small Business Jobs Act of 2010, P.L. 111–240, permits plans that include
a qualified Roth contribution program to provide for rollovers to designated Roth accounts in the same plan (“in-plan Roth
rollovers”). Notice 2010–84, 2010–51 I.R.B. 872, provides guidance on in-plan Roth rollovers under § 402A(c)(4). For a plan
offering in-plan Roth rollovers, Q&A–5 of Notice 2010–84 provides an amendment to the safe harbor explanation for payments
not from a designated Roth account that can be used to satisfy § 402(f).
Section 402A(c)(4)(E), which was added to the Code by the American Taxpayer Relief Act of 2012, P.L. 112–240, permits the
in-plan Roth rollover of amounts not otherwise distributable. Notice 2013–74, 2013–52 I.R.B. 819, provides additional guidance
on in-plan Roth rollovers, including on in-plan Roth rollovers of amounts not otherwise distributable. Notice 2013–74 modifies
Notice 2010–84, and also provides that a written explanation under § 402(f) is not required for a participant who makes an
in-plan Roth rollover of an amount not otherwise distributable.
Proposed regulations that would modify § 1.402A–1, Q&A–5(a), were issued in conjunction with Notice 2014–54. The proposed
regulations would limit the applicability of the requirement in § 1.402A–1, Q&A–5(a), applicable to distributions from designated
Roth accounts, that “any amount paid in a direct rollover is treated as a separate distribution from any amount paid directly
to the employee.” Under the proposed regulations, this separate distribution requirement would not apply to distributions
made on or after the applicability date of the Treasury decision finalizing the proposed regulations. Before the proposed
regulations are finalized, taxpayers are permitted to apply the rules set out in section III of Notice 2014–54.
Section III of Notice 2014–54 provides new rules on the allocation of pretax and after-tax amounts among disbursements made
from a plan to multiple destinations. Notice 2014–54 provides that the new allocation rules generally apply to distributions
made on or after January 1, 2015 (or the applicability date of the Treasury decision that finalizes the proposed regulations
under § 1.402A–1, in the case of distributions from a designated Roth account). However, transition rules permit the earlier
application of the new allocation rules. The notice also provides that the IRS intends to revise the safe harbor explanations
under § 402(f) to reflect the new allocation rules.
This section III contains amendments to update the safe harbor explanations in Notice 2009–68 for changes in the law occurring
after September 28, 2009, and to make certain other clarifying changes. The amendments with respect to in-plan Roth rollovers
apply to plans that offer in-plan Roth rollovers, including in-plan Roth rollovers of amounts not otherwise distributable,
and the amendments with respect to the allocation of pretax and after-tax amounts apply to plans that apply the guidance in
section III of Notice 2014–54. The updated safe harbor explanations provided in this notice can be used by plan administrators
and payors to satisfy § 402(f). However, the updated safe harbor explanations will not satisfy § 402(f) to the extent the
explanations are no longer accurate because of a change in the relevant law occurring after December 8, 2014. The instructions
in Notice 2009–68 on how to use the safe harbor explanations continue to apply.
Part A contains amendments to the safe harbor explanation for payments not from a designated Roth account and Part B contains
amendments to the safe harbor explanation for payments from a designated Roth account. References throughout the safe harbor
explanations to “IRS Publication 590, Individual Retirement Arrangements (IRAs)” should be replaced with “IRS Publication 590–A, Contributions to Individual Retirement Arrangements (IRAs), and Publication 590–B, Distributions from Individual Retirement Arrangements (IRAs),” as applicable, after Publications 590–A and 590–B are issued. Restated safe harbor explanations that include these amendments
are at the end of this notice.
1. Under the heading “How much may I roll over?,” replace the eighth bullet with the following:
Payments of certain automatic enrollment contributions requested to be withdrawn within 90 days of the first contribution
2. Under the heading “If I don’t do a rollover, will I have to pay the 10% additional income tax on early distributions?,”
delete the ninth bullet (as it repeats the concept found in the last bullet), which reads:
Contributions made under special automatic enrollment rules that are withdrawn pursuant to your request within 90 days of
3. Under the heading “If I do a rollover to an IRA, will the 10% additional income tax apply to early distributions from the
IRA?,” replace item (3) in the last bullet with the following:
payments for health insurance premiums after you have received unemployment compensation for 12 consecutive weeks (or would
have been eligible to receive unemployment compensation but for self-employed status).
4. Under the heading “If your payment includes after-tax contributions,” replace the first and second paragraphs with the
After-tax contributions included in a payment are not taxed. If a payment is only part of your benefit, an allocable portion
of your after-tax contributions is included in the payment, so you cannot take a payment of only after-tax contributions.
However, if you have pre-1987 after-tax contributions maintained in a separate account, a special rule may apply to determine
whether the after-tax contributions are included in a payment. In addition, special rules apply when you do a rollover, as
You may roll over to an IRA a payment that includes after-tax contributions through either a direct rollover or a 60-day rollover.
You must keep track of the aggregate amount of the after-tax contributions in all of your IRAs (in order to determine your
taxable income for later payments from the IRAs). If you do a direct rollover of only a portion of the amount paid from the
Plan and at the same time the rest is paid to you, the portion directly rolled over consists first of the amount that would
be taxable if not rolled over. For example, assume you are receiving a distribution of $12,000, of which $2,000 is after-tax
contributions. In this case, if you directly roll over $10,000 to an IRA that is not a Roth IRA, no amount is taxable because
the $2,000 amount not directly rolled over is treated as being after-tax contributions. If you do a direct rollover of the
entire amount paid from the Plan to two or more destinations at the same time, you can choose which destination receives the
If you do a 60-day rollover to an IRA of only a portion of a payment made to you, the after-tax contributions are treated
as rolled over last. For example, assume you are receiving a distribution of $12,000, of which $2,000 is after-tax contributions,
and no part of the distribution is directly rolled over. In this case, if you roll over $10,000 to an IRA that is not a Roth
IRA in a 60-day rollover, no amount is taxable because the $2,000 amount not rolled over is treated as being after-tax contributions.
5. Under the heading “If you roll over your payment to a Roth IRA,” delete the first paragraph, which reads:
You can roll over a payment from the Plan made before January 1, 2010 to a Roth IRA only if your modified adjusted gross income
is not more than $100,000 for the year the payment is made to you and, if married, you file a joint return. These limitations
do not apply to payments made to you from the Plan after 2009. If you wish to roll over the payment to a Roth IRA, but you
are not eligible to do a rollover to a Roth IRA until after 2009, you can do a rollover to a traditional IRA and then, after
2009, elect to convert the traditional IRA into a Roth IRA.
6. Under the heading “If you roll over your payment to a Roth IRA,” replace the second paragraph with the following:
If you roll over a payment from the Plan to a Roth IRA, a special rule applies under which the amount of the payment rolled
over (reduced by any after-tax amounts) will be taxed. However, the 10% additional income tax on early distributions will
not apply (unless you take the amount rolled over out of the Roth IRA within 5 years, counting from January 1 of the year
of the rollover).
7. Under the heading “If you roll over your payment to a Roth IRA,” delete the fourth paragraph, which reads:
You cannot roll over a payment from the Plan to a designated Roth account in an employer plan.
8. Following the section that is headed “If you roll over your payment to a Roth IRA,” add a new section to read as follows:
You cannot roll over a distribution to a designated Roth account in another employer’s plan. However, you can roll the distribution
over into a designated Roth account in the distributing Plan. If you roll over a payment from the Plan to a designated Roth
account in the Plan, the amount of the payment rolled over (reduced by any after-tax amounts directly rolled over) will be
taxed. However, the 10% additional tax on early distributions will not apply (unless you take the amount rolled over out of
the designated Roth account within the 5-year period that begins on January 1 of the year of the rollover).
If you roll over the payment to a designated Roth account in the Plan, later payments from the designated Roth account that
are qualified distributions will not be taxed (including earnings after the rollover). A qualified distribution from a designated
Roth account is a payment made both after you are age 59½ (or after your death or disability) and after you have had a designated
Roth account in the Plan for at least 5 years. In applying this 5-year rule, you count from January 1 of the year your first
contribution was made to the designated Roth account. However, if you made a direct rollover to a designated Roth account
in the Plan from a designated Roth account in a plan of another employer, the 5-year period begins on January 1 of the year
you made the first contribution to the designated Roth account in the Plan or, if earlier, to the designated Roth account
in the plan of the other employer. Payments from the designated Roth account that are not qualified distributions will be
taxed to the extent of earnings after the rollover, including the 10% additional income tax on early distributions (unless
an exception applies).
1. Under the heading “How do I do a rollover?,” replace the next-to-last paragraph with the following:
If you do a direct rollover of only a portion of the amount paid from the Plan and a portion is paid to you at the same time,
the portion directly rolled over consists first of earnings.
2. Under the heading “How much may I roll over?,” replace the eighth bullet with the following:
3. Under the heading “If I don’t do a rollover, will I have to pay the 10% additional income tax on early distributions?,”
delete the eighth bullet (as it repeats the concept found in the last bullet), which reads:
4. Under the heading “If I do a rollover to a Roth IRA, will the 10% additional income tax apply to early distributions from
the IRA?,” replace item (3) in the last bullet with the following:
Notice 2009–68 is modified.
The principal author of this notice is Angelique Carrington of the Employee Plans, Tax Exempt and Government Entities Division.
Questions regarding this notice may be sent via e-mail to RetirementPlanQuestions@irs.gov.
For Payments Not From a
You are receiving this notice because all or a portion of a payment you are receiving from the [INSERT NAME OF PLAN] (the
“Plan”) is eligible to be rolled over to an IRA or an employer plan. This notice is intended to help you decide whether to
do such a rollover.
This notice describes the rollover rules that apply to payments from the Plan that are not from a designated Roth account (a type of account with special tax rules in some employer plans). If you also receive a payment
from a designated Roth account in the Plan, you will be provided a different notice for that payment, and the Plan administrator
or the payor will tell you the amount that is being paid from each account.
Rules that apply to most payments from a plan are described in the “General Information About Rollovers” section. Special
rules that only apply in certain circumstances are described in the “Special Rules and Options” section.
You will be taxed on a payment from the Plan if you do not roll it over. If you are under age 59½ and do not do a rollover,
you will also have to pay a 10% additional income tax on early distributions (unless an exception applies). However, if you
do a rollover, you will not have to pay tax until you receive payments later and the 10% additional income tax will not apply
if those payments are made after you are age 59½ (or if an exception applies).
You may roll over the payment to either an IRA (an individual retirement account or individual retirement annuity) or an employer
plan (a tax-qualified plan, section 403(b) plan, or governmental section 457(b) plan) that will accept the rollover. The rules
of the IRA or employer plan that holds the rollover will determine your investment options, fees, and rights to payment from
the IRA or employer plan (for example, no spousal consent rules apply to IRAs and IRAs may not provide loans). Further, the
amount rolled over will become subject to the tax rules that apply to the IRA or employer plan.
There are two ways to do a rollover. You can do either a direct rollover or a 60-day rollover.
If you do a direct rollover, the Plan will make the payment directly to your IRA or an employer plan. You should contact the IRA sponsor or the administrator
of the employer plan for information on how to do a direct rollover.
If you do not do a direct rollover, you may still do a rollover by making a deposit into an IRA or eligible employer plan that will accept it. You will have
60 days after you receive the payment to make the deposit. If you do not do a direct rollover, the Plan is required to withhold
20% of the payment for federal income taxes (up to the amount of cash and property received other than employer stock). This
means that, in order to roll over the entire payment in a 60-day rollover, you must use other funds to make up for the 20%
withheld. If you do not roll over the entire amount of the payment, the portion not rolled over will be taxed and will be
subject to the 10% additional income tax on early distributions if you are under age 59½ (unless an exception applies).
If you wish to do a rollover, you may roll over all or part of the amount eligible for rollover. Any payment from the Plan
is eligible for rollover, except:
Certain payments spread over a period of at least 10 years or over your life or life expectancy (or the lives or joint life
expectancy of you and your beneficiary)
Required minimum distributions after age 70½ (or after death)
Corrective distributions of contributions that exceed tax law limitations
Loans treated as deemed distributions (for example, loans in default due to missed payments before your employment ends)
Cost of life insurance paid by the Plan
Amounts treated as distributed because of a prohibited allocation of S corporation stock under an ESOP (also, there will generally
be adverse tax consequences if you roll over a distribution of S corporation stock to an IRA).
The Plan administrator or the payor can tell you what portion of a payment is eligible for rollover.
If you are under age 59½, you will have to pay the 10% additional income tax on early distributions for any payment from the
Plan (including amounts withheld for income tax) that you do not roll over, unless one of the exceptions listed below applies.
This tax is in addition to the regular income tax on the payment not rolled over.
The 10% additional income tax does not apply to the following payments from the Plan:
Payments made after you separate from service if you will be at least age 55 in the year of the separation
Payments that start after you separate from service if paid at least annually in equal or close to equal amounts over your
life or life expectancy (or the lives or joint life expectancy of you and your beneficiary)
Payments from a governmental defined benefit pension plan made after you separate from service if you are a public safety
employee and you are at least age 50 in the year of the separation
Payments made due to disability
Payments after your death
Payments of ESOP dividends
Payments made directly to the government to satisfy a federal tax levy
Payments made under a qualified domestic relations order (QDRO)
Payments up to the amount of your deductible medical expenses
Certain payments made while you are on active duty if you were a member of a reserve component called to duty after September
11, 2001 for more than 179 days
Payments of certain automatic enrollment contributions requested to be withdrawn within 90 days of the first contribution.
If you receive a payment from an IRA when you are under age 59½, you will have to pay the 10% additional income tax on early
distributions from the IRA, unless an exception applies. In general, the exceptions to the 10% additional income tax for early
distributions from an IRA are the same as the exceptions listed above for early distributions from a plan. However, there
are a few differences for payments from an IRA, including:
There is no exception for payments after separation from service that are made after age 55.
The exception for qualified domestic relations orders (QDROs) does not apply (although a special rule applies under which,
as part of a divorce or separation agreement, a tax-free transfer may be made directly to an IRA of a spouse or former spouse).
The exception for payments made at least annually in equal or close to equal amounts over a specified period applies without
regard to whether you have had a separation from service.
There are additional exceptions for (1) payments for qualified higher education expenses, (2) payments up to $10,000 used
in a qualified first-time home purchase, and (3) payments for health insurance premiums after you have received unemployment
compensation for 12 consecutive weeks (or would have been eligible to receive unemployment compensation but for self-employed
This notice does not describe any State or local income tax rules (including withholding rules).
You may roll over to an employer plan all of a payment that includes after-tax contributions, but only through a direct rollover
(and only if the receiving plan separately accounts for after-tax contributions and is not a governmental section 457(b) plan).
You can do a 60-day rollover to an employer plan of part of a payment that includes after-tax contributions, but only up to
the amount of the payment that would be taxable if not rolled over.
Generally, the 60-day rollover deadline cannot be extended. However, the IRS has the limited authority to waive the deadline
under certain extraordinary circumstances, such as when external events prevented you from completing the rollover by the
60-day rollover deadline. To apply for a waiver, you must file a private letter ruling request with the IRS. Private letter
ruling requests require the payment of a nonrefundable user fee. For more information, see IRS Publication 590–A, Contributions to Individual Retirement Arrangements (IRAs).
If you do not do a rollover, you can apply a special rule to payments of employer stock (or other employer securities) that
are either attributable to after-tax contributions or paid in a lump sum after separation from service (or after age 59½,
disability, or the participant’s death). Under the special rule, the net unrealized appreciation on the stock will not be
taxed when distributed from the Plan and will be taxed at capital gain rates when you sell the stock. Net unrealized appreciation
is generally the increase in the value of employer stock after it was acquired by the Plan. If you do a rollover for a payment
that includes employer stock (for example, by selling the stock and rolling over the proceeds within 60 days of the payment),
the special rule relating to the distributed employer stock will not apply to any subsequent payments from the IRA or employer
plan. The Plan administrator can tell you the amount of any net unrealized appreciation.
If you have an outstanding loan from the Plan, your Plan benefit may be offset by the amount of the loan, typically when your
employment ends. The loan offset amount is treated as a distribution to you at the time of the offset and will be taxed (including
the 10% additional income tax on early distributions, unless an exception applies) unless you do a 60-day rollover in the
amount of the loan offset to an IRA or employer plan.
If you were born on or before January 1, 1936 and receive a lump sum distribution that you do not roll over, special rules
for calculating the amount of the tax on the payment might apply to you. For more information, see IRS Publication 575, Pension and Annuity Income.
If the Plan is a governmental section 457(b) plan, the same rules described elsewhere in this notice generally apply, allowing
you to roll over the payment to an IRA or an employer plan that accepts rollovers. One difference is that, if you do not do
a rollover, you will not have to pay the 10% additional income tax on early distributions from the Plan even if you are under
age 59½ (unless the payment is from a separate account holding rollover contributions that were made to the Plan from a tax-qualified
plan, a section 403(b) plan, or an IRA). However, if you do a rollover to an IRA or to an employer plan that is not a governmental
section 457(b) plan, a later distribution made before age 59½ will be subject to the 10% additional income tax on early distributions
(unless an exception applies). Other differences are that you cannot do a rollover if the payment is due to an “unforeseeable
emergency” and the special rules under “If your payment includes employer stock that you do not roll over” and “If you were
born on or before January 1, 1936” do not apply.
If the Plan is a governmental plan, you retired as a public safety officer, and your retirement was by reason of disability
or was after normal retirement age, you can exclude from your taxable income plan payments paid directly as premiums to an
accident or health plan (or a qualified long-term care insurance contract) that your employer maintains for you, your spouse,
or your dependents, up to a maximum of $3,000 annually. For this purpose, a public safety officer is a law enforcement officer,
firefighter, chaplain, or member of a rescue squad or ambulance crew.
If you roll over the payment to a Roth IRA, later payments from the Roth IRA that are qualified distributions will not be
taxed (including earnings after the rollover). A qualified distribution from a Roth IRA is a payment made after you are age
59½ (or after your death or disability, or as a qualified first-time homebuyer distribution of up to $10,000) and after you
have had a Roth IRA for at least 5 years. In applying this 5-year rule, you count from January 1 of the year for which your
first contribution was made to a Roth IRA. Payments from the Roth IRA that are not qualified distributions will be taxed to
the extent of earnings after the rollover, including the 10% additional income tax on early distributions (unless an exception
applies). You do not have to take required minimum distributions from a Roth IRA during your lifetime. For more information,
see IRS Publication 590–A, Contributions to Individual Retirement Arrangements (IRAs), and IRS Publication 590–B, Distributions from Individual Retirement Arrangements (IRAs).
Payments after death of the participant. If you receive a distribution after the participant’s death that you do not roll over, the distribution will generally be
taxed in the same manner described elsewhere in this notice. However, the 10% additional income tax on early distributions
and the special rules for public safety officers do not apply, and the special rule described under the section “If you were
born on or before January 1, 1936” applies only if the participant was born on or before January 1, 1936.
If you are a surviving spouse. If you receive a payment from the Plan as the surviving spouse of a deceased participant, you have the same rollover options
that the participant would have had, as described elsewhere in this notice. In addition, if you choose to do a rollover to
an IRA, you may treat the IRA as your own or as an inherited IRA.
An IRA you treat as your own is treated like any other IRA of yours, so that payments made to you before you are age 59½ will
be subject to the 10% additional income tax on early distributions (unless an exception applies) and required minimum distributions
from your IRA do not have to start until after you are age 70½.
If you treat the IRA as an inherited IRA, payments from the IRA will not be subject to the 10% additional income tax on early
distributions. However, if the participant had started taking required minimum distributions, you will have to receive required
minimum distributions from the inherited IRA. If the participant had not started taking required minimum distributions from
the Plan, you will not have to start receiving required minimum distributions from the inherited IRA until the year the participant
would have been age 70½.
If you are a surviving beneficiary other than a spouse. If you receive a payment from the Plan because of the participant’s death and you are a designated beneficiary other than
a surviving spouse, the only rollover option you have is to do a direct rollover to an inherited IRA. Payments from the inherited
IRA will not be subject to the 10% additional income tax on early distributions. You will have to receive required minimum
distributions from the inherited IRA.
Payments under a qualified domestic relations order. If you are the spouse or former spouse of the participant who receives a payment from the Plan under a qualified domestic
relations order (QDRO), you generally have the same options the participant would have (for example, you may roll over the
payment to your own IRA or an eligible employer plan that will accept it). Payments under the QDRO will not be subject to
the 10% additional income tax on early distributions.
If you are a nonresident alien and you do not do a direct rollover to a U.S. IRA or U.S. employer plan, instead of withholding
20%, the Plan is generally required to withhold 30% of the payment for federal income taxes. If the amount withheld exceeds
the amount of tax you owe (as may happen if you do a 60-day rollover), you may request an income tax refund by filing Form
1040NR and attaching your Form 1042–S. See Form W–8BEN for claiming that you are entitled to a reduced rate of withholding
under an income tax treaty. For more information, see also IRS Publication 519, U.S. Tax Guide for Aliens, and IRS Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities.
If a payment is one in a series of payments for less than 10 years, your choice whether to make a direct rollover will apply
to all later payments in the series (unless you make a different choice for later payments).
If your payments for the year are less than $200 (not including payments from a designated Roth account in the Plan), the
Plan is not required to allow you to do a direct rollover and is not required to withhold for federal income taxes. However,
you may do a 60-day rollover.
Unless you elect otherwise, a mandatory cashout of more than $1,000 (not including payments from a designated Roth account
in the Plan) will be directly rolled over to an IRA chosen by the Plan administrator or the payor. A mandatory cashout is
a payment from a plan to a participant made before age 62 (or normal retirement age, if later) and without consent, where
the participant’s benefit does not exceed $5,000 (not including any amounts held under the plan as a result of a prior rollover
made to the plan).
You may have special rollover rights if you recently served in the U.S. Armed Forces. For more information, see IRS Publication
3, Armed Forces’ Tax Guide.
You may wish to consult with the Plan administrator or payor, or a professional tax advisor, before taking a payment from
the Plan. Also, you can find more detailed information on the federal tax treatment of payments from employer plans in: IRS
Publication 575, Pension and Annuity Income; IRS Publication 590–A, Contributions to Individual Retirement Arrangements (IRAs); IRS Publication 590–B, Distributions from Individual Retirement Arrangements (IRAs); and IRS Publication 571, Tax-Sheltered Annuity Plans (403(b) Plans). These publications are available from a local IRS office, on the web at www.irs.gov, or by calling 1-800-TAX-FORM.
For Payments From a
“Plan”) is eligible to be rolled over to a Roth IRA or designated Roth account in an employer plan. This notice is intended
to help you decide whether to do a rollover.
This notice describes the rollover rules that apply to payments from the Plan that are from a designated Roth account. If you also receive a payment from the Plan that is not from a designated Roth account, you will be provided a different
notice for that payment, and the Plan administrator or the payor will tell you the amount that is being paid from each account.
Rules that apply to most payments from a designated Roth account are described in the “General Information About Rollovers”
section. Special rules that only apply in certain circumstances are described in the “Special Rules and Options” section.
After-tax contributions included in a payment from a designated Roth account are not taxed, but earnings might be taxed. The
tax treatment of earnings included in the payment depends on whether the payment is a qualified distribution. If a payment
is only part of your designated Roth account, the payment will include an allocable portion of the earnings in your designated
If the payment from the Plan is not a qualified distribution and you do not do a rollover to a Roth IRA or a designated Roth
account in an employer plan, you will be taxed on the earnings in the payment. If you are under age 59½, a 10% additional
income tax on early distributions will also apply to the earnings (unless an exception applies). However, if you do a rollover,
you will not have to pay taxes currently on the earnings and you will not have to pay taxes later on payments that are qualified
If the payment from the Plan is a qualified distribution, you will not be taxed on any part of the payment even if you do
not do a rollover. If you do a rollover, you will not be taxed on the amount you roll over and any earnings on the amount
you roll over will not be taxed if paid later in a qualified distribution.
A qualified distribution from a designated Roth account in the Plan is a payment made after you are age 59½ (or after your
death or disability) and after you have had a designated Roth account in the Plan for at least 5 years. In applying the 5-year
rule, you count from January 1 of the year your first contribution was made to the designated Roth account. However, if you
did a direct rollover to a designated Roth account in the Plan from a designated Roth account in another employer plan, your
participation will count from January 1 of the year your first contribution was made to the designated Roth account in the
Plan or, if earlier, to the designated Roth account in the other employer plan.
You may roll over the payment to either a Roth IRA (a Roth individual retirement account or Roth individual retirement annuity)
or a designated Roth account in an employer plan (a tax-qualified plan or section 403(b) plan) that will accept the rollover.
The rules of the Roth IRA or employer plan that holds the rollover will determine your investment options, fees, and rights
to payment from the Roth IRA or employer plan (for example, no spousal consent rules apply to Roth IRAs and Roth IRAs may
not provide loans). Further, the amount rolled over will become subject to the tax rules that apply to the Roth IRA or the
designated Roth account in the employer plan. In general, these tax rules are similar to those described elsewhere in this
notice, but differences include:
If you do a rollover to a Roth IRA, all of your Roth IRAs will be considered for purposes of determining whether you have
satisfied the 5-year rule (counting from January 1 of the year for which your first contribution was made to any of your Roth
IRAs).
If you do a rollover to a Roth IRA, you will not be required to take a distribution from the Roth IRA during your lifetime
and you must keep track of the aggregate amount of the after-tax contributions in all of your Roth IRAs (in order to determine
your taxable income for later Roth IRA payments that are not qualified distributions).
Eligible rollover distributions from a Roth IRA can only be rolled over to another Roth IRA.
There are two ways to do a rollover. You can either do a direct rollover or a 60-day rollover.
If you do a direct rollover, the Plan will make the payment directly to your Roth IRA or designated Roth account in an employer plan. You should contact
the Roth IRA sponsor or the administrator of the employer plan for information on how to do a direct rollover.
If you do not do a direct rollover, you may still do a rollover by making a deposit within 60 days into a Roth IRA, whether the payment is a qualified or nonqualified
distribution. In addition, you can do a rollover by making a deposit within 60 days into a designated Roth account in an employer
plan if the payment is a nonqualified distribution and the rollover does not exceed the amount of the earnings in the payment.
You cannot do a 60-day rollover to an employer plan of any part of a qualified distribution. If you receive a distribution
that is a nonqualified distribution and you do not roll over an amount at least equal to the earnings allocable to the distribution,
you will be taxed on the amount of those earnings not rolled over, including the 10% additional income tax on early distributions
if you are under age 59½ (unless an exception applies).
If you do not do a direct rollover and the payment is not a qualified distribution, the Plan is required to withhold 20% of
the earnings for federal income taxes (up to the amount of cash and property received other than employer stock). This means
that, in order to roll over the entire payment in a 60-day rollover to a Roth IRA, you must use other funds to make up for
the 20% withheld.
be adverse tax consequences if S corporation stock is held by an IRA).
If a payment is not a qualified distribution and you are under age 59½, you will have to pay the 10% additional income tax
on early distributions with respect to the earnings allocated to the payment that you do not roll over (including amounts
withheld for income tax), unless one of the exceptions listed below applies. This tax is in addition to the regular income
tax on the earnings not rolled over.
If you receive a payment from a Roth IRA when you are under age 59½, you will have to pay the 10% additional income tax on
early distributions on the earnings paid from the Roth IRA, unless an exception applies or the payment is a qualified distribution.
In general, the exceptions to the 10% additional income tax for early distributions from a Roth IRA listed above are the same
as the exceptions for early distributions from a plan. However, there are a few differences for payments from a Roth IRA,
There is no special exception for payments after separation from service.
as part of a divorce or separation agreement, a tax-free transfer may be made directly to a Roth IRA of a spouse or former
If you receive a payment that is not a qualified distribution and you do not roll it over, you can apply a special rule to
payments of employer stock (or other employer securities) that are paid in a lump sum after separation from service (or after
age 59½, disability, or the participant’s death). Under the special rule, the net unrealized appreciation on the stock included
in the earnings in the payment will not be taxed when distributed to you from the Plan and will be taxed at capital gain rates
when you sell the stock. If you do a rollover to a Roth IRA for a nonqualified distribution that includes employer stock (for
example, by selling the stock and rolling over the proceeds within 60 days of the distribution), you will not have any taxable
income and the special rule relating to the distributed employer stock will not apply to any subsequent payments from the
Roth IRA or employer plan. Net unrealized appreciation is generally the increase in the value of the employer stock after
it was acquired by the Plan. The Plan administrator can tell you the amount of any net unrealized appreciation.
If you receive a payment that is a qualified distribution that includes employer stock and you do not roll it over, your basis
in the stock (used to determine gain or loss when you later sell the stock) will equal the fair market value of the stock
at the time of the payment from the Plan.
employment ends. The loan offset amount is treated as a distribution to you at the time of the offset and, if the distribution
is a nonqualified distribution, the earnings in the loan offset will be taxed (including the 10% additional income tax on
early distributions, unless an exception applies) unless you do a 60-day rollover in the amount of the earnings in the loan
offset to a Roth IRA or designated Roth account in an employer plan.
If you were born on or before January 1, 1936, and receive a lump sum distribution that is not a qualified distribution and
that you do not roll over, special rules for calculating the amount of the tax on the earnings in the payment might apply
to you. For more information, see IRS Publication 575, Pension and Annuity Income.
or was after normal retirement age, you can exclude from your taxable income nonqualified distributions paid directly as premiums
to an accident or health plan (or a qualified long-term care insurance contract) that your employer maintains for you, your
spouse, or your dependents, up to a maximum of $3,000 annually. For this purpose, a public safety officer is a law enforcement
officer, firefighter, chaplain, or member of a rescue squad or ambulance crew.
taxed in the same manner described elsewhere in this notice. However, whether the payment is a qualified distribution generally
depends on when the participant first made a contribution to the designated Roth account in the Plan. Also, the 10% additional
income tax on early distributions and the special rules for public safety officers do not apply, and the special rule described
under the section “If you receive a nonqualified distribution and you were born on or before January 1, 1936” applies only
if the participant was born on or before January 1, 1936.
a Roth IRA, you may treat the Roth IRA as your own or as an inherited Roth IRA.
A Roth IRA you treat as your own is treated like any other Roth IRA of yours, so that you will not have to receive any required
minimum distributions during your lifetime and earnings paid to you in a nonqualified distribution before you are age 59½
will be subject to the 10% additional income tax on early distributions (unless an exception applies).
If you treat the Roth IRA as an inherited Roth IRA, payments from the Roth IRA will not be subject to the 10% additional income
tax on early distributions. An inherited Roth IRA is subject to required minimum distributions. If the participant had started
taking required minimum distributions from the Plan, you will have to receive required minimum distributions from the inherited
Roth IRA. If the participant had not started taking required minimum distributions, you will not have to start receiving required
minimum distributions from the inherited Roth IRA until the year the participant would have been age 70½.
a surviving spouse, the only rollover option you have is to do a direct rollover to an inherited Roth IRA. Payments from the
inherited Roth IRA, even if made in a nonqualified distribution, will not be subject to the 10% additional income tax on early
distributions. You will have to receive required minimum distributions from the inherited Roth IRA.
Payments under a qualified domestic relations order. If you are the spouse or a former spouse of the participant who receives a payment from the Plan under a qualified domestic
payment as described in this notice).
If your payments for the year (only including payments from the designated Roth account in the Plan) are less than $200, the
you can do a 60-day rollover.
Unless you elect otherwise, a mandatory cashout from the designated Roth account in the Plan of more than $1,000 will be directly
rolled over to a Roth IRA chosen by the Plan administrator or the payor. A mandatory cashout is a payment from a plan to a
participant made before age 62 (or normal retirement age, if later) and without consent, where the participant’s benefit does
not exceed $5,000 (not including any amounts held under the plan as a result of a prior rollover made to the plan).