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IRS Notice 2020-62


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Re new 402(f) Notices. How quickly do you think these (or similarly updated Notices) need to be utilized? For distributions as of today, or are we realistically ok for a couple of weeks, etc.? Doesn't take long to manually copy the IRS model into a Word document and do this manually, but takes a little time to update systems/procedures, etc.

Curious as to how quickly folks are implementing this. Of course, sometimes these are produced by the recordkeeping platform, so that's a separate question.

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You never need to use it, it's only a safe harbor. Any differences between your notice and the model take yours out of the safe harbor, but don't necessarily make it invalid.

Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance.

Corey B. Zeller, MSEA, CPC, QPA, QKA
Preferred Pension Planning Corp.
corey@pppc.co

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Thanks. What I really meant to ask was: let's say a current standard Notice is based on the "old" IRS model Notice. So it doesn't currently comply with the changes due to CARES Act. Is there any timeframe by which updated 402(f) notices must be used? Seems like there must be some reasonable lead time before you go to jail for using one that isn't updated. The IRS Notice 2020-62 doesn't address this question.

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To follow the statute, a plan’s administrator (if it uses the safe-harbor explanation) should have rewritten its § 402(f) notice as soon as the preceding safe-harbor explanation no longer met the commands of § 402(f)(1)(A)-(E).

 

Whatever reliance Notice 2018-74 afforded, one gets no reliance to the extent that an explanation is no longer accurate because of a law change after September 18, 2018.  (A caution of that kind has been in successive IRS Notices with revised safe-harbor explanations.)

 

Yet many service providers wait for the IRS’s release of a revised safe-harbor explanation.

 

Some businesspeople imagine the Internal Revenue Service might be reluctant to assess a penalty against an administrator if it delivered an otherwise proper notice grounded on the preceding safe-harbor explanation and the only defect is incorrect or incomplete content while waiting for the IRS’s revised safe-harbor explanation.

 

Likewise, some administrators estimate (whether expressly or impliedly) a modest exposure to liability for a distributee’s reliance on incomplete, incorrect, or misleading information.

 

For an administrator or service provider that waits for the IRS’s revision of a safe-harbor explanation, it seems wise to implement a new version promptly after the IRS publishes it.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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5 hours ago, Belgarath said:

Re new 402(f) Notices. How quickly do you think these (or similarly updated Notices) need to be utilized? For distributions as of today, or are we realistically ok for a couple of weeks, etc.? Doesn't take long to manually copy the IRS model into a Word document and do this manually, but takes a little time to update systems/procedures, etc.

Curious as to how quickly folks are implementing this. Of course, sometimes these are produced by the recordkeeping platform, so that's a separate question.

Isn't the only change regarding Roth accounts; if the plan doesn't allow for Roth accounts (only ONE of our plans provides for Roth), do you even need to modify your old form? I have not yet had a chance to research that question, but that was my initial impression.

Lawrence C. Starr, FLMI, CLU, CEBS, CPC, ChFC, EA, ATA, QPFC
President
Qualified Plan Consultants, Inc.
46 Daggett Drive
West Springfield, MA 01089
413-736-2066
larrystarr@qpc-inc.com

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Quote

III. MODIFICATIONS TO THE SAFE HARBOR EXPLANATIONS

Two updated safe harbor explanations are appended to this notice (see the Appendix). The safe harbor explanations modify the safe harbor explanations in Notice 2018-74 to reflect certain legislative changes made after October 1, 2018, including: (1) the exception to the 10% additional tax under § 72(t)(1) for qualified birth or adoption distributions, and (2) the increase to age 72 for minimum required distributions for employees born after June 30, 1949. The safe harbor explanations also include other minor modifications to improve their clarity, including adding that payments of certain premiums for health and accident insurance are not eligible rollover distributions, rearranging bullets for readability, and spelling out acronyms when first used.

 

Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance.

Corey B. Zeller, MSEA, CPC, QPA, QKA
Preferred Pension Planning Corp.
corey@pppc.co

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Well, I guess the IRS has only updated the language once this year in Notice 2020-62, although FTW gave us updated language in February for the items noted above by C. B. Zeller, with his quote coming from the Notice (just issued recently).  They also added some text about "disasters" reflecting the CARES Act and made some other tweaks.  (My point isn't well made but I was confused when reading this thread, as I thought the SECURE Act language was already provided by the IRS.)

In any event it is one of those things where we do our best (we will start using the new notices immediately) but have no concerns at all about whether an "old" one slipped out.  I think for there to be any consequences someone would have to sue, which implies they read the notice, which is a preposterous assumption.

 

Ed Snyder

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While the differences are not major, the new version covers both pre- and post-SECURE Act RMDs, and provides the user with the cut-off birthdate for which applies, so there is no problem with switching immediately, other than the clerical/administrative hassle. But you will need to do  eventually.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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