As part of its continuing efforts to aid industry compliance with the SECURE Act, the SPARK Institute is making available a redraft of the 402(f) notice given to participants to help them understand their rollover options.
The SPARK Institute today released suggested revisions to the required rollover notice, showing edits to reflect changes made by the Setting Every Community Up for Retirement Enhancement Act, or SECURE Act, signed into law on December 20, 2019. These redline changes are intended to assist SPARK Institute members, plan sponsors, and other industry participants in complying with the notice requirement until the IRS releases an updated model notice.
Tim Rouse, Executive Director of the SPARK Institute stated, “We were strong supporters of the SECURE Act, which accomplished a number of key SPARK Institute priorities. Although the law will require a lot of work, and many of the provisions went into effect almost immediately, we have already rolled up our sleeves to assist the industry and retirement savers.” Retirement plans are required to provide a “rollover notice,” also called a 402(f) notice or special tax notice, when a participant in a plan takes a distribution that can be rolled over. This notice explains the options available to the individual, and the tax consequences of not rolling over the distribution into another plan or IRA. The SECURE Act made a number of changes to federal tax law that affects the information on the 402(f) notice. The IRS periodically releases an updated model notice, but doing so takes time. The SPARK Institute’s suggested edits are intended to help plan administrators determine what changes might be needed to their 402(f) notice.
The suggested edits, developed by SPARK Institute’s Government Relations Committee, are available on SPARK’s website (www.sparkinstitute.org) for both members and non-members. Use of the document is voluntary. The document has not been approved by the IRS, but has been sent to regulators as part of the SPARK Institute’s ongoing efforts to provide input as the Department of the Treasury, IRS, and the Department of Labor develop regulations and guidance under the SECURE Act.
“Because so many of the SECURE Act provisions kicked in so quickly, SPARK’s Government Relations Committee has felt it important to provide as much input as we can to government regulators on SECURE Act issues,” said Michael Hadley, partner at Davis & Harman LLP, which provides outside governmental relations support for the SPARK Institute, “We sent our first guidance request to the IRS and Treasury within a few days of passage of SECURE, and we are working on additional comment letters to help regulators determine both priorities and key questions to address.”
For more information, please contact Tim Rouse at tim@sparkinstitute.org.
About the SPARK Institute
The SPARK Institute represents the interests of a broad-based cross section of retirement plan service providers and investment managers, including members that are banks, mutual fund companies, insurance companies, third-party administrators, trade clearing firms, and benefits consultants. Through the combined expertise of its member companies, the Institute provides research, education, testimony, and comments on pending legislative and regulatory issues to members of Congress and relevant Government agency officials. Collectively, its members serve approximately 100 million participants in 401(k) and other defined contribution plans.