Special Tax Notice

[RCK]

As I understand it, a Special Tax Notice is supposed to be provided no less than 30 days and no more than 90 days before an eligible rollover distribution, and the 30 day notice can be waived under certain circumstances.

We do offer waiver of the 30 day period. But we have not always monitored the 90 day requirement.

We are allowing web-initiated distributions, and those are of course OK because the notice is there when they make the request. But if the participant gets the distribution form and Special Tax notice from their local HR person, we have no way of tracking the date that it was delivered.

So my question is whether other sponsors actively monitor the 90 day requirement, or if there is some way around it. Any advice would be greatly appreciated.

[Guest M.L. Martin]

My experience has been that the 90-day requirement has not been monitored.

Prior to having distributions available online, the HR or Benefit departments of our clients would provide “termpaks” that included a cover letter (with date), distribution forms and the notice whenever a participant left the company. Most of my clients would keep a copy of what was sent/given to the participant in their files. I think that as long as the administrator has written procedures in place and copies as back-up if ever questioned, then the responsibility lies with the administrator and not the sponsor for proof that it was provided.

With my former employer, for every client, system generated notices would be automatically produced and sent @ 30 days & then again @ 60 days if there was no response. I am not aware that anything was in place to specifically track when and who received the notice unless the system did it automatically.

The Company that I currently work for sends out the term package for the client whenever notified of a participant’s termination. A log is maintained as to when the package was first sent, when it was returned, when the distribution was completed, etc.