IRS Updates Model Notices for Retirement Plan Rollovers

If your organization sponsors a qualified retirement plan for employees, you’re no doubt aware of the many compliance risks involved. But there’s one requirement in particular that many employers overlook: the written explanation — or “notice” — that employee-participants must receive when withdrawing money from the plan.

In Notice 2026-13, the IRS recently updated its model rollover notices to reflect changes set forth under the SECURE 2.0 Act. Although this update doesn’t require employer-sponsors to materially change their plans, it does affect the proper handling of certain types of distributions and the notices sent to employees about them.

What the law requires

Participants typically take eligible rollover distributions from a qualified plan when they experience a major transition, such as changing jobs, retiring or leaving the workforce. Internal Revenue Code Section 402(f) requires that participants receive a written rollover notice “within a reasonable period” before the distribution — generally no more than 180 days in advance, and at least 30 days before the distribution unless the participant waives that period. The notice must explain:

• Their option to roll over the money into another plan or IRA,
• The tax consequences of taking the money in cash vs. rolling over,
• Any required tax withholding, and
• Special rules that may apply to Roth funds vs. non-Roth funds.

As mentioned, the IRS provides model notices for plan administrators (and, in some cases, payors) to use as templates to help ensure compliance. If a notice is missing or inaccurate, it can create compliance and operational risks for the administrator/payor — and potentially the sponsor as well.

Areas of impact

The content of Notice 2026-13 is largely driven by SECURE 2.0, which significantly changed plan distribution rules. For starters, the IRS has updated its two safe-harbor explanations and issued them as two model notices. The first covers distributions from non-Roth accounts, such as traditional 401(k) plans. The second applies to distributions from designated Roth accounts, such as 401(k)s with a Roth option. If an employee is eligible to receive both types of distributions, both notices must be provided.

In addition, Notice 2026-13 addresses four other areas of impact:

1. Expanded exceptions to the early withdrawal penalty. Normally, unless an exception applies, distributions taken before age 59½ are subject to a 10% early withdrawal penalty. SECURE 2.0 expanded the list of exceptions, among other changes, to include certain distributions for:

• Emergency personal expenses,
• Domestic abuse victims,
• Terminally ill individuals,
• Qualified disaster recovery, and
• Eligible long-term care.

The updated IRS model notices clarify the exceptions and their associated tax treatment to help employees understand their options.

2. Required minimum distribution (RMD) changes. SECURE 2.0 also changed the age at which employees must begin taking RMDs. The starting age is now 73 or 75 (up from 72), depending on the individual’s birth year. Also, lifetime RMDs have been eliminated for Roth accounts held in employer-sponsored retirement plans. The revised model notices no longer explicitly reference age in determining a participant’s required beginning date for RMDs. They also reflect changes to the RMD rules for surviving spouses and the elimination of RMDs for Roth accounts.

3. Higher “cash out” amount. SECURE 2.0 increased the dollar threshold below which a plan may make an immediate lump-sum distribution without a participant’s consent following a qualifying event. The new model notices disclose the higher threshold of $7,000 (up from $5,000), which also applies to automatic rollovers of mandatory distributions.

4. Special rules for “pension-linked” emergency savings accounts (PLESAs). Introduced under SECURE 2.0, PLESAs allow eligible participants in defined contribution plans to build emergency funds they can draw on rather than tapping their retirement savings. The revised model notices now include an explanation of the PLESA distribution rules.

Employer actions

Use of the IRS model notices isn’t required, but they’re generally considered a good place to start. Plan administrators/payors may customize their notices by removing inapplicable sections. Just be sure yours clearly include all required information.

So, where should you go from here? First, confirm that your internal benefits team or third-party administrator/payor is aware of the new model notices and is considering their impact. Second, review who’s responsible for delivering rollover notices, and verify that the issuance process reflects the current rules under SECURE 2.0.

Good for everyone

Clear, accurate rollover notices protect your organization, reduce compliance risk and deliver important information to participants. We can help you review your qualified retirement plan to identify vulnerabilities and align it with your budget and strategic objectives.

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