Stephen H. Cypen, Esq., Editor

IRS UPDATES SAFE HARBOR EXPLANATIONS FOR ELIGIBLE ROLLOVER DISTRIBUTIONS: In accordance with Internal Revenue Service Notice 2009-68, updating the Safe Harbor Explanations for Eligible Rollover Distributions, administrators of qualified plans are required to provide rollover recipients with a clearly written explanation of rules related to eligible rollover distributions (see C&C Newsletter for October 22, 2009, Item 3).  The written explanation should include descriptions of (1) direct rollover rules; (2) mandatory income tax withholding rules; (3) tax treatment of distributions that are not rolled over; (4) when distributions may be subject to different restrictions; and (5) tax consequences of the rollover.  The written explanation is to be provided to the recipient not more than 180 days and not less than 30 days before the date on which the distribution is to be made.  However, the recipient may waive the 30-day requirement.  Notice 2009-68 provides two safe harbor explanations that satisfy the Code: one for rollovers from designated Roth accounts and the other for all other rollovers.  The new explanations update those issued in 2002, and include tax law changes made by the Economic Growth and Tax Relief Reconciliation Act of 2001; the Pension Protection Act of 2006; and the Worker, Retiree, and Employer Recovery Act of 2008, among others.  The changes include, but are not limited to: 

1. Ability of participants to roll over amounts from an eligible employer plan to a Roth IRA (subject to certain income and other limitations); 

1. Ability of non-spouse beneficiaries to roll over distributions to IRAs (required for all plan years beginning after January 1, 2010); and 

1. Relief from the 10% early withdrawal penalty for distributions from government plans to qualified public safety employees who separate from service after attainment of age 50. 

Notice 2009-68 allows plan administrators to customize safe harbor explanations by omitting information that does not apply to the plan, provided the resulting document is consistent with the safe harbor explanations.  A sample Non-Roth IRA Safe Harbor Rollover Notice, which we have customized for qualified Florida municipal plans, can be accessed at http://bit.ly/5brC7w. 

Notice 2009-68 can be accessed in its entirety at: http://www.irs.gov/pub/irs-drop/n-09-68.pdf.