Special Tax Notice (Section 402(f) Notice)

The Special Tax Notice (Section 402(f) Notice) is a legal template that provides important information to participants in retirement plans regarding the tax implications associated with receiving eligible rollover distributions. This notice is typically sent by plan administrators or custodians to individuals who are about to receive a distribution from their retirement savings accounts, such as 401(k) plans or individual retirement accounts (IRAs).

The purpose of the Special Tax Notice is to ensure that plan participants are aware of their options and potential tax consequences when deciding what to do with their retirement savings. The notice informs the recipients about their ability to directly roll over the distribution into another qualified retirement plan or IRA, or to receive the distribution directly, which may result in immediate tax obligations.

The template includes details about the tax rules relevant to eligible rollover distributions, such as potential mandatory withholding, reporting requirements, and the potential for early withdrawal penalties. It may also provide explanations of the different rollover options available, including the pros and cons of each choice.

The Special Tax Notice aims to assist participants in making informed decisions about their retirement savings, emphasizing the importance of considering the long-term tax implications. By providing clear and concise information, this legal template also serves as a compliance tool, ensuring that plan administrators fulfill their obligations in educating plan participants about the tax consequences involved in receiving a distribution.