Can we simplify rollovers between retirement plans?

[Peter Gulia]

Can we simplify rollovers between retirement plans?

Here’s yesterday’s prepublication release of IRS Guidance on Section 324 of the SECURE 2.0 Act with Respect to Rollovers, Notice 2026-49, 2026- -- I.R.B. --- (---, 2026), https://www.irs.gov/pub/irs-drop/n-26-49.pdf

The Notice suggests a step-by-step way for a receiving plan to get information and money from a distributing plan.

The Notice includes sample forms.

Will this work?

[Bri]

My guess is they'll either work great (common RK platform DC plans), or they'll be horrible (trustee-directed pooled assets with spousal consent).

[Peter Gulia]

Bri, thank you.

I get the difficulty about a distributing plan that still has a spouse’s-consent condition.

So I learn something: About trustee-directed pooled assets, is the difficulty that such a plan often lacks daily valuation and might impose monthly, quarter-yearly, or yearly intervals and valuation dates to measure a distribution? Or is it something else?

BenefitsLink neighbors, what other hang-ups happen in dealing with rollovers?

[Paul I]

The proposed process has 5 steps and involves 4 "forms" (read exchanges of information between the distributing plan and the receiving plan).  The process also encourages an electronic transfer of funds and disallows sending a rollover check directly to the participant to forward to the receiving plan.  I agree with @Bri that the process likely will flow relatively smoothly for common plan designs on larger recordkeeping platforms.

The first step of the process is for the participant to notify the receiving plan on the intent to make a rollover.  This first step is an exchange of information between the participant who often has incomplete knowledge of about the provisions in their plan, and the receiving plan who has no knowledge about the distributing plan's provisions.  Let's just say incorrect assumptions likely will be made about the features and administrative procedures of the distributing plan.

@Bri's observation about the valuation frequency certainly is an issue.

Here are some examples of a few more potential issues:

• The distributing plan has a graded vesting schedule and uses an hours rule for crediting vesting service.  Hours worked in the vesting computation period will need to be collected from the plan sponsor.
• The distributing plan has a match or nonelective employer contribution without a last day allocation requirement (or waives it for retirement, death or disability) and the participant is eligible for an NEC which will not be made until after year end.
• The distributing plan has employer stock which is not publicly traded  or other assets which valued less frequently than daily, and the valuation of these assets is not available daily.
• The individual who notifies the receiving plan about a rollover may assume they are a beneficiary or alternate payee entitled to a benefit when, in fact, they are not based on the terms of beneficiary elections or a QDRO.
• The participant who notifies the receiving plan has an outstanding loan and has not provided information to the distributing plan about whether the participant intends to payoff the loan prior to the distribution being paid (so it can be included in the rollover), or intends to let the loan default.
• The distributing plan may allow for in-kind distributions which will require much more coordination with the receiving plan than is contemplated in the proposed process.
• The participant is an HCE who tends routinely tends to receive refunds because the plan fails nondiscrimination testing.

I expect our BenefitsLink neighbors easily can add many more examples a lack of familiarity with the operation of the distributing plan (both by the participant and the receiving plan) can cause chaos.

[Peter Gulia]

The steps and forms the IRS suggests involve a “certification” some plans’ administrators might be reluctant or unwilling to state.

Form 2: Receiving Plan’s Request to Distributing Plan would state:

“To the best of my knowledge, . . . the Receiving Plan is tax-qualified[.]”

Form 3:  Distributing Plan’s Rollover Certification would state:

“To the best of my knowledge, . . . the Distributing Plan is tax-qualified[.]”

I recall when many people were unwilling to sign such a statement; is that still a problem?

[Pam Shoup]

In my opinion, there needs to be some work done on the electronic exchange of funds. Even though the information that is supposed to go with the wire or ACH is communicated, that information either does not get transmitted or gets truncated.  I can't tell you the number of times we get in a wire with no identifying information, including the name of participant, the sending plan, Roth data, etc.  Trust companies sometimes get in wires that don't even contain the name or identifying information of the PLAN the money belongs to. It is not uncommon for a trading partner to ask us if we can identify a piece of money. Basically, we spend a lot of time trying to identify rollover wires because the information did not get transferred with the wire. If there were some way to get all the information needed to come over with the wire, that would solve a lot of the paperwork issues.

We have had some participants tell us that recordkeepers require that the paper checks be sent directly to the participant. The participant is then required to log into their account and enter the data from the check and other information and then upload an image of the check. I believe that if the check amount is smaller than a certain threshold, they don't need to send the physical check to the recordkeeper.

We have had checks sent to recordkeepers mailed back to us and told that we need to send the check to the participant for processing.

We have also had other recordkeepers require that the rollover check be sent to the receiving employer or that the sending employer needs to forward the check. There is no standardization in the process at all so I understand the need to setup something.  However, I think that the handling of the proceeds themselves can be the bigger challenge than the paperwork. 

[Peter Gulia]

Pam Shoup, thank you for your useful catalog of some difficulties. (I know from experience that there are many more.)

The frustrations you mention might be a meaningful part of why someone asked Congress to legislate that the Internal Revenue Service publish guidance.

“A notice is a public pronouncement by the IRS that may contain guidance that involves substantive interpretations of the IRC or other provisions of the law. Notices may be used in circumstances in which a revenue ruling or revenue procedure would not be appropriate. In addition, notices may be used to solicit public comments on issues under consideration, in connection with non-regulatory guidance, such as a proposed revenue procedure.” Internal Revenue Manual 4.10.7.2.4.1(1)(b)[3] (Sep. 12, 2022).

I suspect retirement plans’ administrators and their service providers might need much more persuasion than whatever exhortation IRS Notice 2026-49 might suggest.

[Peter Gulia]

If a distributing plan refuses to sign a statement that the plan is tax-qualified, how does a receiving plan react to that?

Does a receiving plan accept a statement that the distributing plan is intended to be tax-qualified?

[RatherBeGolfing]

On 8/17/2026 at 10:43 AM, Peter Gulia said:

If a distributing plan refuses to sign a statement that the plan is tax-qualified, how does a receiving plan react to that?

Does a receiving plan accept a statement that the distributing plan is intended to be tax-qualified?

I'm such a slacker, I haven't had time to dig into the new guidance.  Can we no longer check the last 5500 of the distributing plan and assume that it is qualified as long as it doesn't use code 3C (not intended to be qualified)?

[Paul I]

The IRS is proposing a 5-step rollover process that goes back and forth between a Receiving Plan and a Distributing Plan. The process proposes four Forms that pass between providers to document the rollover.  Here is the header for Form 3 

Form 3: Distributing Plan’s Rollover Certification
On behalf of the plan participant or IRA owner named below (Participant), the plan or
IRA named below (Distributing Plan) has received a request from the plan or IRA named
below (Receiving Plan) to roll over amounts held in the Distributing Plan, as requested
by the Participant. This form confirms that the Distributing Plan is tax-qualified and that
the amounts are eligible for rollover, using a rollover method selected below.

The last sentence - and elsewhere on the form - the Distributing Plan is certifying that the plan is tax-qualified.  There are some plans that already balk at providing a certification that the plan is tax-qualified because they don't know what they don't know about possible failures which could disqualify the plan.  While the vast majority of plans are tax-qualified, there are instances where a plan is not due to operational, compliance or document issues.  In most of these cases, the plan continues to be tax-qualified as the plan takes remedial actions.

Frankly, money talks. I have never encountered a situation where a receiving plan refuses to accept a rollover from another plan because the distributing plan refuses to certify the plan was tax-qualified.

I think it is worth pointing out in any comments sent to the IRS about the process that a representation that the plan is intended to be qualified should suffice, or possibly with an added caveat that there are remedial actions being taken to continue the plan's tax-qualified status.

 

[Peter Gulia]

I see in Notice 2026-49 nothing that undoes Revenue Ruling 2014-9’s interpretation that a receiving plan’s administrator looking to a distributing plan’s most recent Form 5500 report or return (if there is one) and finding the absence of a code showing that the plan is not intended to be tax-qualified can be a good-enough effort to presume that the distributing plan likely is intended to be tax-qualified.

It seems odd that an IRS-suggested form would call a distributing plan’s administrator to state that the plan is tax-qualified when the Treasury’s rule calls it enough for a receiving plan to get the distributing plan’s statement “that Plan O is intended to satisfy the requirements of section 401(a) and that the administrator of Plan O is not aware of any Plan O provision or operation that would result in the disqualification of Plan O[.]” 26 C.F.R. § 1.401(a)(31)-1/Q&A-14(c) Example 2 https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR6f8c3724b50e44d/section-1.401(a)(31)-1.