Special Tax Notice

[austin3515]

Does anyone have a generic special tax notice that they have been using that doesn;t reference any recordkeeper names?  Something special designed for TPA's for example?  I know Relius Documents spits one out but I think they customize it quite a bit based on plan document elections and we want one for all plans.

The IRS one has two separate notices, one for Roth and one for Pre-tax and that's, well, not workable.

[david rigby]

Pretty simple to take the IRS version and cut out the parts you don't need (for example, if the Plan has no Roth accounts).  In my experience, the only thing I customize is the plan name.  Easy peasy.

 

[austin3515]

We send out one notice for all distributions.  The admin people sure do like the simplicity of that. No edits at all.  I would posit that if the only thing you're changing is the name of the plan perhaps you could skip that step with a little clever wording!

That seems to be what the recordkeepers do too, but they have references to the call in numbers and websites throughout, etc.

[Belgarath]

As a slight modification of David Rigby's suggestion, just cut and paste BOTH entire IRS versions into one document - the non-Roth and the Roth. Then just have a line saying if you have only pre-tax, ignore Section "B" (the Roth) or vice versa. This approach makes for more pages if you only have 1 or the other, but you also have one generic notice, which I think would solve your problem?

[austin3515]

I agree but we do still order thousands of copies a year and that's a lot more paper than one combined notice...

[Belgarath]

Rock. You. Hard place. I have no perfect solution. Electronic distribution carries its own hassles - personally, I'd prefer to stick with extra pages (using recycled paper, of course). 

[austin3515]

Also there is SO MUCH duplication. IT's as though they wanted to make it as impractical as possible.

[Peter Gulia]

The IRS’s Notice 2020-62 about safe-harbor explanations for eligible rollover distributions warns: “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 August 6, 2020.” https://www.irs.gov/irb/2020-35_IRB#NOT-2020-62.

What changes do you make so a text furnished now explains current law, including SECURE 2022 changes?

One imagines some service providers follow SPARK Institute’s suggestions (which SPARK warns is not tax or legal advice): https://www.sparkinstitute.org/wp-content/uploads/2023/03/Special-Tax-Notice-SECURE-2.0-Act-Updates-Final-3.24.23-00391206.pdf.

Are there changes not mentioned in SPARK’s suggestions?

Which law changes are included in (or omitted from) Relius’ suggested explanation?

[ESOP Guy]

We don't put plan name on any of our tax notices.  

I am not the person who has the authority to decide if we can share or not but someone here played with the fonts and so forth and it is down to landscape 2 pages.  You print it back to back obviously 1 sheet of paper. 

We do have a Roth vs non-Roth version but can be printed on 1 sheet of paper.  

[austin3515]

That;s impressive.  The notice we have been using is 4 pages combined, and the font looks like 8pt!

[Peter Gulia]

About adjusting typefaces, fonts, point sizes, line spacing, margins and line lengths, columns, layout, and other visual elements, a plan’s administrator or payer might evaluate whether the result meets the rule’s command that “[t]he section 402(f) notice must be designed to be easily understood[.]”

26 C.F.R. § 1.402(f)-1 https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/section-1.402(f)-1.

That observed, one might use good typography and layout to manage a page count while preserving readability.

[Belgarath]

9 minutes ago, Peter Gulia said:

easily understood

This always cracks me up. Along with the  "Paperwork Reduction Act" analyses by the DOL.😁

[Peter Gulia]

And let’s remember that executive agencies write a Paperwork Reduction Act explanation because Congress—decision-makers “we the people” elected—decides to require those explanations.