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And They All Said Rollover: IRS Updates Special Tax Notice for Retirement Plan Distributions to Reflect Recent Law Changes

  • Writer: Milton Heber
    Milton Heber
  • 4 hours ago
  • 3 min read

Plan administrators of qualified plans, 403(b) plans, and governmental 457(b) plans are required under Internal Revenue Code (IRC) §402(f) to provide a written explanation regarding eligible rollover distributions (sometimes called a “special tax notice”) to participants 30-180 days before making an eligible rollover distribution.  The IRS issued Notice 2026-13 on January 15, 2026 to update the information required to be in the special tax notice for recent law changes, including the SECURE 2.0 Act. 


The new IRS guidance includes two safe harbor explanations that can be used to satisfy the requirements of IRC §402(f) – one for non-Roth accounts, and the other for Roth accounts. Using an outdated version of the special tax notice will not satisfy the requirements of IRC §402(f), so plan sponsors should ensure the updated versions are being used, either by the plan sponsor or any service provider that has been designated as the plan administrator, or that assists with distribution of the special tax notice.


The following are some of the law changes included in the updated safe harbor explanations:


  1. The list of distributions that qualify for an exception from the 10% early withdrawal penalty was expanded to include:

    1. Distributions for emergency personal expenses 

    2. Distributions for qualified birth or adoption distributions

    3. Certain distributions to qualified public safety employees and private-sector firefighters

    4. Distributions to domestic abuse victims

    5. Distributions to terminally ill individuals

    6. Qualified disaster recovery distributions

    7. Distributions from pension-linked emergency savings accounts (PLESAs)

    8. Qualified long-term care distributions


  2. The explanations have been updated for changes in the rules relating to Required Minimum Distributions (“RMDs”):

    1. The applicable age for Required Minimum Distribution (RMD) purposes has been updated – the previously applicable age of 70 ½ before 2020 was gradually increased to age 72 for 2020-2022, to 73 for 2023-2032, and 75 for 2033 and later years.

    2. The RMD rules have been eliminated for designated Roth accounts in a plan.

    3. The surviving spouse of an employee can elect to be treated as the employee for RMD purposes.


  3. Distributions from governmental plans to eligible retired public safety officers are not includible in gross income if paid by the employee for qualified health insurance premiums for the year.  Prior law required the insurance premiums to be paid directly to the insurance provider to qualify for the income exclusion.  The SECURE 2.0 Act eliminated the direct payment requirement.  Distributions will now qualify for the income exclusion regardless of whether the premiums are paid directly from the distribution or are paid by the employee.


  4. The explanations now include a description of the special rules and tax treatment of PLESAs, which are short-term savings accounts within defined contribution plans that are treated as designated Roth accounts.  Distributions from PLESAs are generally not treated as eligible rollover distributions unless the distributions are transferred to another designated Roth account.


Plan administrators have the option to provide a customized version of the explanations.  However, providing these safe harbor explanations will provide comfort to plan administrators that they are satisfying the requirements of IRC §402(f).  Plan administrators should consider deleting portions of the explanations that do not apply to their plans. 


Please contact a Boutwell Fay attorney if you have questions about the updated safe harbor explanations.



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© Boutwell Fay LLP 2026, All Rights Reserved. This handout is for information purposes only and may constitute attorney advertising. It should not be construed as legal advice and does not create an attorney-client relationship. If you have questions or would like our advice with respect to any of this information, please contact us.



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