Section 2. Definitions

2.1. Eligible rollover distribution: An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include:

l) any distribution that is one of a series of substantially equal periodic

payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee’s designated beneficiary, or for a specified period of ten years or more, ;

m) any distribution to the extent such distribution is required under

§ 401(a)(9) of the Internal Revenue Code, ;

n) any hardship distribution, ; and

o) any other distribution(s) that is reasonably expected to total less than $200

during a year,

p) any corrective distribution of excess amounts under sections 402(g),

401(k), 401(m), and/or 415(c) of the Code and income allocable thereto,

q) loans that are treated as deemed distributions under section 72(p) of the

Code,

r)dividends paid on employer securities as described in section 404(k) of the

Code,

s)the costs of life insurance coverage,

t) prohibited allocations that are treated as deemed distributions under

section 409(p) of the Code,

u) permissible withdrawals from eligible automatic contribution

arrangements under section 414(w) of the Code, and

l)v )distributions of premiums for accident and health insurance under section

1.402(a)-1(e)(1)(i) of the Treasury Regulations.

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For purposes of the $200 rule, a distribution from a designated Roth account and a distribution from other accounts under the plan are treated as made under separate plans.

Any portion of an eligible rollover distribution a distribution t hat consists of aftertax employee contributions which are not includible in gross income may be transferred only to (1) a traditional individual retirement account or annuity described in sections 408(a) or (b) of the Code (a “traditional IRA”) or a Roth individual retirement account or annuity described in section 408A of the Code (a “Roth IRA”); or (2) to a qualified plan or an annuity contract described in sections 401(a) and 403(b) of the Code, respectively, that agrees to separate accounting for amounts so transferred (and earnings thereon), including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible.

(Note to reviewer: If an employer has chosen the required beginning date described in LRM #49, Adoption Agreement section 3.1 (April 1 of the calendar year following the calendar year in which the participant reaches the Applicable Age), the statutory required beginning date (described in LRM # 49, Adoption Agreement section 3.3) applies for other purposes, including the participant’s required beginning date for purposes of determining whether a distribution is an eligible rollover distribution under § 402(c).)

(Note to reviewer: If an employer has chosen a required beginning date under § 401(a)(9) of the Code, described in LRM #49, section 5.5(1) (April 1 of the calendar year following the calendar year in which the participant reaches age 70 ½), the statutory required beginning date (described in LRM # 49, 5.5 (3)) applies for other purposes, including the participant’s required beginning date for purposes of an eligible rollover distribution under § 402(c).)

( Note to reviewer: The CARES Act provided that required minimum distributions waived for 2020 are not treated as eligible rollover distributions under Code § 401(a)(31) and therefore plans are not required to offer direct rollovers of those distributions. Notice 2020-51 contains sample language providing that, in the absence of an election in the adoption agreement, a direct rollover will be offered only for distributions that would be eligible rollover distributions in the absence of section Code § 401(a)(9)(I). Notice 2020-51 also provides sample adoption agreement language for available options. See also the Sample Adoption Agreement language contained in LRM 49, section 4.3.)

2.2. Eligible retirement plan: An eligible retirement plan is

g) an eligible plan under section 457(b) of the Code which is maintained by a

state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state, and which agrees to separately account for amounts transferred into such plan from this plan,

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h) a traditional IRA,

i) a Roth IRA,

j) an annuity plan described in section 403(a) of the Code,

k) an annuity contract described in section 403(b) of the Code, or

l) or a qualified plan described in section 401(a) of the Code. ,

that accepts the distributee’s eligible rollover distribution. The definition of eligible retirement plan shall also apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in § 414(p) of the Code. I f any portion of an eligible rollover distribution is attributable to payments or distributions from a designated Roth account, an eligible retirement plan with respect to such portion shall include only another designated Roth account of the individual from whose account the payments or distributions were made, or a Roth IRA of such individual.

(Note to reviewer: The Protecting Americans from Tax Hikes provisions of the Consolidated Appropriations Act of 2016, Pub. L. 114-113, (“the PATH Act”) expanded portability of retirement assets by permitting taxpayers to roll over assets from traditional and SEP IRAs, as well as from employer-sponsored retirement plans, such as a § 401(k), § 403(b), or § 457(b) plan, into SIMPLE IRAs. For distributions made after December 18, 2015, a qualified plan can provide for a direct rollover to a SIMPLE -I RA. However, the following restrictions apply: (1) SIMPLE IRAs cannot accept rollovers from Roth IRAs or designated Roth accounts, and (2) rollovers to or from the SIMPLE IRA cannot be made until after the two-year period beginning on the date the participant first participated in their employer’s SIMPLE IRA plan.

For distributions made during plan years beginning after December 31, 2023, distributions from a terminated SIMPLE IRA may be rolled over to an eligible retirement plan that is not a SIMPLE IRA only if the amounts is rolled over to either: (1) a § 401(k) plan that is subject to the distribution limits of § 401(k)(2)(B), or (2) a § 403(b) arrangement that is subject to the distribution limits of § 403(b)(11). See Q&A G-4 of Notice 2024-2.)

(Note to reviewer: The Protecting Americans from Tax Hikes provisions of the Consolidated Appropriations Act of 2016, Pub. L. 114-113, (“the PATH Act”) expands portability of retirement assets by permitting taxpayers to roll over assets from traditional and SEP IRAs, as well as from employer- sponsored retirement plans, such as a 401(k), 403(b), or 457(b) plan, into a SIMPLE IRA plan. Thus, after amendment by the PATH Act, a qualified plan can provide for a direct rollover to a SIMPLE-IRA. However, the following restrictions apply: (1) the

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provision does not allow SIMPLE IRAs to accept rollovers from Roth IRAs or designated Roth accounts, (2) the change applies only to rollovers made after the two-year period beginning on the date the participant first participated in their employer’s SIMPLE IRA plan, (3) the new law applies to rollovers from other plans to SIMPLE IRAs that are made after December 18, 2015, the date of enactment, and (4) the one-per-year limitation that applies to IRA-to-IRA rollovers applies to rollovers from a traditional, SIMPLE, or SEP IRA into a SIMPLE IRA.)

(Note to reviewer: See LRM #49 regarding application of guidance interpreting the Windsor decision to the rollover rules of IRC § 402(c).)

2.3 Distributee: A distributee includes an employee or former employee. The employee’s or former employee’s surviving spouse and the employee’s or former employee’s spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse. A distributee also includes the employee’s or former employee’s nonspouse designated beneficiary, in which case, the distribution can only be transferred to a traditional or Roth IRA established on behalf of the nonspouse designated beneficiary for the purpose of receiving the distribution.

2.4. Direct Rollover: A direct rollover is a payment by the plan to the eligible retirement plan specified by the distributee.

Section 3. Written Explanation of Right to Direct Rollover. The plan administrator shall provide, within a reasonable time period before making an eligible rollover distribution, a written explanation to the participant that satisfies the requirements of section 402(f) of the Code.

Section 34 . Automatic Rollovers:

In the event of a mandatory distribution greater than $1,000 in accordance with the provisions of section _____, if the participant does not elect to have such distribution paid directly to an eligible retirement plan specified by the participant in a direct rollover or to receive the distribution directly in accordance with section(s) _____, then the plan administrator will pay the distribution in a direct rollover to an individual retirement plan designated by the plan administrator. For purposes of determining whether a mandatory distribution is greater than $1,000, the portion of the participant’s distribution attributable to any rollover contribution is included.

(Note to reviewer: The first blank should be filled in with the plan section number which provides for mandatory distributions. See LRM #43. The second blank should be filled in with the plan section number which corresponds to employee elections. The automatic rollover requirements of § 401(a)(31)(B) apply to mandatory distributions made on or after March 28, 2005. However, note that the SECURE 2.0 Act of 2022 increased the immediately distributable dollar limit.)

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Section 45 . Rollovers from other plans

If provided by the employer in the adoption agreement, the plan will accept participant rollover contributions and/or direct rollovers of the types of contributions and from the types of plans specified in the adoption agreement.

Adoption Agreement Provisions:

Direct Rollovers: The plan will accept a direct rollover of an eligible rollover distribution from: (Check each that applies or none.)

( ) a qualified plan described in section 401(a) or 403(a) of the Code , excluding after-tax employee contributions.

( ) an annuity contract described in section 403(b) of the Code.

( ) an eligible plan under section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state.

(Choose one.)

( ) Including after-tax employee contributions from the plans or contracts checked above.

( ) Excluding after-tax employee contributions from the plans or contracts checked above.

(Choose one.)

( ) Including distributions from designated Roth accounts from the applicable plans or contracts checked above.

( ) Excluding distributions from designated Roth accounts from the applicable plans or contracts checked above.

In-Plan Roth Rollovers

( ) If checked, the plan will permit participants to make in-plan Roth rollovers.

Participant Rollover Contributions from Other Plans: The plan will accept a participant contribution of an eligible rollover distribution from: (Check each that applies or none.)

( ) a qualified plan described in section 401(a) or 403(a) of the Code, excluding after-tax employee contributions.

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( ) an annuity contract described in section 403(b) of the Code, excluding aftertax employee contributions.

( ) an eligible plan under section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state.

Participant Rollover Contributions from IRAs:

The Plan: (Choose one.)

( ) will

( ) will not

accept a participant rollover contribution of the portion of a distribution from an individual retirement account or annuity described in section 408(a) or (b) of the Code that is eligible to be rolled over and would otherwise be includible in gross income.

(Note to reviewer: The SECURE 2.0 Act of 2022 added new IRC § 414(aa) to permit plan sponsors to amend a plan to account for benefit overpayments and to reduce future payments to the correct amount. The Act also added new IRC § 402(c)(12), which provides for continued eligible rollover treatment for (1) a benefit overpayment that had been rolled over if recoupment is not sought, or (2) the return of the distribution to the plan through a rollover distribution if recoupment is sought. Neither Code §§ 402(c)(12) nor 414(aa) are included on the 2023 Cumulative List, so sample plan language is not provided in this regard. However, sponsors may include provisions consistent with this statutory treatment.)

(Note to reviewer: After amendment by section 604(a) of the SECURE 2.0 Act of 2022, IRC §§ 402(c)(8)(B) and 402A(c)(3)(A) provide that if any portion of an eligible rollover distribution is attributable to payments or distributions from a designated Roth account, that portion is permitted to be rolled over only to another designated Roth account or to a Roth IRA. This includes a separate account that is established for designated Roth matching contributions or designated Roth nonelective contributions. See DC LRM #25 and CODA LRM IX.

Similarly, § 402A(c)(4)(B) requires an applicable retirement plan to include a qualified Roth contribution program in order for the plan to permit employees to make in-plan Roth rollovers. The sample plan language at Section 1.1 above is compliant for this purpose.)