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:

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

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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,

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

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

c) any hardship distribution,

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

during a year,

e) 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,

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

Code,

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

Code,

h) the costs of life insurance coverage,

i) prohibited allocations that are treated as deemed distributions under

section 409(p) of the Code,

j) permissible withdrawals from eligible automatic contribution

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

k) distributions of premiums for accident and health insurance under section

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

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 that consists of after-tax 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.

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(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: 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

a) 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,

b) a traditional IRA,

c) a Roth IRA,

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

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

f) a qualified plan described in section 401(a) of the Code.

If 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

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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 IRA. 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.)

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.