Updated safe harbor explanations for retirement plans

The Department of the Treasury and the Internal Revenue Service issued new guidance on Jan. 15, 2026, updating the safe harbor explanations that retirement plan administrators may use when communicating rollover options to plan participants. The guidance, released as Notice 2026-13, reflects significant tax law changes enacted after August 6, 2020, including key provisions of the Setting Every Community Up for Retirement Enhancement Act (SECURE 2.0 Act) of 2022. The notice officially supersedes the prior guidance in Notice 2020-62.

For tax professionals who advise plan sponsors, administrators or participants, the update is critical. Section 402(f) of the Internal Revenue Code requires plan administrators to provide written explanations to recipients of eligible rollover distributions. These explanations must describe a participant's distribution options and the related tax consequences. Notice 2026-13 refreshes the IRS-approved language that administrators can rely on to satisfy these requirements, providing a shield against any potential compliance failures.

Two distinct safe harbor explanations

Notice 2026-13 provides two separate safe harbor explanations: one for distributions from other than designated Roth accounts (generally traditional, pre-tax retirement accounts) and another for distributions from designated Roth accounts. This distinction is crucial, as the tax treatment of Roth and non-Roth accounts differs. Plan administrators should provide the appropriate notice based on the source of funds. If a participant can receive distributions from both account types, both explanations should be provided. 

Incorporating SECURE 2.0 and other law changes

The revised explanations incorporate numerous statutory updates, many of which stem from the SECURE 2.0 Act. Among the most notable are new exceptions to the 10% additional tax on early distributions. The notice reflects new exceptions, including distributions for:

• Emergency personal expenses (up to $1,000 per calendar year)
• Victims of domestic abuse (up to the lesser of $10,000 (indexed) or 50% of the vested account balance, with a three-year repayment window)
• Terminally ill individuals
• Qualified disaster recovery
• Payments for qualified long-term care insurance premiums 

The guidance also reflects expanded relief for qualified public safety employees and private-sector firefighters. It is important to note that while some of these distributions are exempt from the 10% penalty, they may not be considered eligible rollover distributions. For example, distributions for emergency personal expenses and to domestic abuse victims are not eligible for rollovers, so they are not eligible rollover distributions.

Required minimum distributions (RMD) updates

Notice 2026-13 addresses major law changes to the RMD rules. The updated safe harbor explanations reflect the increased age for the required beginning date (RBD), which is now generally age 73 or 75, depending on the participant’s birth year.

In a significant planning update, the notice incorporates the elimination of lifetime RMDs for designated Roth accounts within employer plans, effective for 2024 and later. This change aligns the rules for employer-sponsored Roth accounts with those for Roth individual retirement accounts (IRAs). The guidance further reflects updated rules for surviving spouses, including the option for a surviving spouse who is the sole designated beneficiary to elect to be treated as the deceased employee for purposes of determining RMD timing.

Enhancing clarity and other key changes

As discussed in Notice 2026-13, in response to a Government Accountability Office (GAO) report, the updated safe harbor explanations are structured to be more user-friendly. They clearly present the four primary options a participant has when receiving a distribution: leaving the money in the plan, rolling it over to a new employer’s plan, rolling it over to an IRA or taking a taxable cash-out.

Other important updates reflected in the notice include:

• Increased mandatory cash-out limit: The threshold for mandatory distributions that can be rolled into an IRA without a participant's consent has increased from $5,000 to $7,000.
• Pension linked emergency savings accounts (PLESAs): The notice addresses these new accounts, clarifying that distributions from PLESAs are generally not eligible for rollovers, with limited exceptions upon termination of employment.

Customization is key

The IRS emphasizes that plan administrators may and should customize the safe harbor explanations. Sections that do not apply to a particular plan, such as provisions on employer stock or after-tax contributions, can be removed to provide clearer, more relevant information to participants while still satisfying §402(f).

For tax professionals, Notice 2026-13 is a call to action. Advisers should be prepared to discuss these updated explanations with plan clients and help individual taxpayers navigate the complex tax consequences of their distribution options. With retirement decisions carrying significant financial weight, accurate and timely guidance is as essential as ever.