The IRS and Treasury released Notice 2026-13 on January 15, 2026, replacing the model rollover explanation that retirement plans hand to employees before a distribution. Plans must give anyone receiving an eligible rollover distribution a written explanation of their options under section 402(f) of the tax code, and many rely on the IRS's safe harbor wording to do it. That wording dated to Notice 2020-62, issued before the SECURE 2.0 Act of 2022 rewrote a long list of retirement rules.
What changed
The notice, announced in IRS release IR-2026-08, again provides two model explanations: one for pre-tax money and one for designated Roth accounts. According to the text of Notice 2026-13, the updates include:
- New exceptions to the 10% additional tax on early distributions for emergency personal expenses, victims of domestic abuse and individuals certified as terminally ill. Emergency and domestic abuse distributions cannot be rolled over; terminal illness distributions generally can.
- A higher involuntary cashout limit. Section 304 of SECURE 2.0 raised from $5,000 to $7,000 the benefit level at or below which a plan may pay out a departed employee's account without consent.
- Later required minimum distributions. The applicable age is 73 for people who reach 72 after 2022 and 73 before 2033, and 75 for those who reach 74 after 2032.
- No RMDs from designated Roth accounts inside an employer plan, aligning them with Roth IRAs.
- Revised rules for surviving spouses and new provisions for retired or disabled public safety employees, as summarized by Mercer.
Administrators may trim sections that do not apply to their plan. The models stop satisfying the law to the extent a change occurring after January 15, 2026, makes them inaccurate, and the IRS said it expects further updates for SECURE 2.0 provisions that take effect later.
Who is affected
Anyone leaving a job, retiring or taking a lump sum from an employer plan will receive this document, typically in the stack of distribution paperwork. For executives with large balances, it is the formal explanation of which choices keep money tax-deferred and which trigger tax now. Plan sponsors and recordkeepers carry the compliance side of the update.
The after-tax math
The costliest mistake the notice describes is also a common one: taking a check instead of a direct rollover. If a payment is not rolled over directly, the plan must withhold 20 percent for federal income tax. The recipient generally has 60 days to deposit the money in an IRA or another plan, and to roll over the full amount must replace the withheld 20 percent from other funds. Any portion not rolled over is taxed, and may also face the 10 percent additional tax on early distributions unless an exception applies.
Example, using round numbers: an executive in her early 50s leaves a company with $600,000 in a pre-tax 401(k).
| Choice (example) | Cash received now | Added to taxable income |
|---|---|---|
| Direct rollover to an IRA | $0; the full $600,000 moves to the IRA | $0 |
| Check to the executive; only the $480,000 received is rolled over within 60 days | $480,000 after $120,000 withheld | $120,000 |
| Same, but $120,000 from savings is also deposited within 60 days | $480,000 after $120,000 withheld | $0; the withholding is credited when she files |
In the middle case, $120,000 lands on top of a senior executive's salary, and if no exception applies the 10 percent additional tax adds another $12,000.
Points worth reviewing before a distribution
Households with a job change or retirement ahead often compare a direct rollover with leaving money in the old plan, and check whether the plan holds both pre-tax and Roth dollars, since each follows its own model explanation. Whether any of the new penalty exceptions fit a particular situation, or whether converting part of a rollover to Roth makes sense, may be worth discussing with a CPA or financial planner before signing a distribution election.
What to watch
Plans are expected to swap the new language into their paperwork in the coming months. The IRS has already signaled another round of updates for SECURE 2.0 provisions with later effective dates.
Sources
After TAX is an independent publication. Articles are general information, not tax, legal or investment advice. Consult a licensed professional about your situation.
