Moving Your 401(k)? New IRS Forms Could Make Rollovers Easier

More than 3 and a half years aft the SECURE 2.0 Act became law, the Department of the Treasury and the IRS person issued guidance to simplify and standardize the rollover process by issuing sample forms for nonstop rollovers to aliases from a status plan. SECURE 2.0 became rule connected December 29, 2022, erstwhile President Biden signed the Consolidated Appropriations Act, 2023 (P.L. 117-328).

The caller guidance, which was published arsenic Notice 2026-49, offers 4 sample forms and a communal five-step process for moving status savings betwixt employer plans, aliases betwixt an employer scheme and an IRA. The forms are optional for now, and the IRS is not yet offering a safe harbor for utilizing them. Here’s what you request to know.

What is simply a rollover?

A rollover is simply a measurement to move money from 1 tax-advantaged status relationship to different without triggering an contiguous taxation bill. You’d commonly usage a rollover erstwhile you time off a occupation and want to move your aged employer’s 401(k) aliases different workplace status scheme into a caller scheme aliases an IRA. You mightiness besides usage it to consolidate status accounts.

When you return a distribution from a status account, the magnitude whitethorn beryllium taxable unless an objection applies. A rollover allows you to move eligible status savings to different status relationship while mostly preserving their tax-deferred status. With a nonstop rollover, the money moves from your aged scheme straight to the receiving scheme aliases IRA alternatively than being paid to you first. That not only makes things simpler, it tin besides thief debar immoderate of the withholding and timing issues that tin originate erstwhile you person the distribution yourself.

The guidance from IRS, successful the shape of Notice 2026-49, focuses connected these nonstop rollovers to aliases from status plans. The guidance and sample forms are not intended for transfers from 1 IRA to another.

Do the caller forms alteration the taxation rules?

No, the caller forms don’t alteration the basal taxation rules for rollovers. An eligible distribution that is decently rolled complete mostly isn't included successful income, and that remains the same. The announcement focuses connected really nonstop rollovers are processed, alternatively than creating a caller benignant of rollover aliases changing which distributions qualify.

Does this alteration my RMD aliases different requirements?

No. Your required minimum distribution (RMD) is the minimum magnitude that mostly must beryllium withdrawn each twelvemonth from definite status accounts erstwhile you scope the applicable RMD age. An RMD isn't an eligible rollover distribution, truthful an magnitude that must beryllium distributed for the twelvemonth can't simply beryllium rolled complete to different status account. Notice 2026-49 makes clear that its caller sample forms and procedures don't switch those underlying distribution rules.

How does Treasury propose this should work?

Under the projected procedure, you would springiness Form 1, the Participant’s Rollover Request, to the scheme aliases IRA receiving the money. That authorizes the receiving scheme to interaction the aged scheme and coordinate the rollover connected your behalf. From there, the 2 plans speech Forms 2 done 4, verify the rollover, and put the transfer. Your authorization expressly permits the 2 plans to coordinate and requires the receiving scheme to notify you if location is simply a problem.

That’s a batch of forms! Is this each connected paper?

No, and the IRS would for illustration that it not be. The agency wants plans to pass and transportation the money electronically whenever possible. If physics transportation isn't available, the projected process calls for the distributing scheme to make a cheque payable to the receiving scheme for your use and nonstop it straight to the receiving plan, alternatively than mailing it to you and having you guardant it.

That alteration is intentional. The Government Accountability Office (GAO), Congress's nonpartisan watchdog, has identified insubstantial checks arsenic 1 of the problems pinch the existing rollover system. In a 2024 report, GAO recovered that astir one-third of surveyed participants received insubstantial rollover checks that they past had to nonstop to the receiving scheme themselves. That tin mean mislaid aliases misplaced checks and clip during which the money isn't earning liking aliases dividends.

Do I person to rotation complete an full account?

You tin rotation complete each aliases portion of an account. Form 1 allows you to take the full account, the full pre-tax amount, the full Roth amount, aliases specified amounts. It besides makes clear that the characteristic of the status savings—pre-tax aliases Roth—remains the aforesaid done this process.

What astir an IRA-to-IRA rollover aliases transfer?

The guidance applies erstwhile astatine slightest 1 broadside of the transaction is an employer plan—so, for example, a rollover from an aged 401(k) to an IRA aliases from an IRA into an employer plan. It does not use erstwhile some the distributing and receiving accounts are IRAs, which Treasury notes are commonly handled done the existing ACATS electronic-transfer system.

Do plans person to usage these forms?

No. For now, plans whitethorn usage the sample forms and procedures, modify them arsenic necessary, incorporated them into their ain systems aliases usage different forms altogether. But Notice 2026-49 does not require the usage of these forms.

What astir a safe harbor?

Using the forms doesn't presently springiness a scheme a typical IRS safe harbor. But Treasury and the IRS are considering whether early guidance should supply safe harbors for plans that usage standardized forms. For example, a receiving scheme mightiness beryllium permitted to trust connected the forms to conclude, absent grounds to the contrary, that the distributing scheme is tax-qualified and the rollover is valid.

Where tin I spot the guidance and sample forms?

The guidance is successful the shape of an IRS Notice (2026-49), available online. The sample forms are successful the Appendix, astatine the backmost of the Notice.

Is that all?

No. Bigger changes could beryllium coming. Treasury and the IRS are considering early guidance that could further push the rollover process toward physics transfers, destruct the believe of sending direct-rollover checks to participants, and restrict immoderate burdensome requirements that tin slow down rollovers. For now, however, those changes are only nether consideration.