Internal Revenue Bulletin 2018-40 (PDF rendition): IRS Notices

Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing. Whole bulletin rendition: numbered items are identified below; other legal material and publisher context remain included. This is not a new standalone advance release.

# INTERNAL REVENUE BULLETIN

4
IRS

Bulletin No. 2018-40
October 1, 2018

## HIGHLIGHTS OF THIS ISSUE

These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.

## Employee Plans

### Notice 2018-73, page 526.

This notice sets forth updates on the corporate bond monthly
yield curve, the corresponding spot segment rates for August
2018 used under § 417(e)(3)(D), the 24-month average
segment rates applicable for September 2018, and the
30-year Treasury rates, as reflected by the application of
§ 430(h)(2)(C)(iv).

### Notice 2018-74, page 529.

Notice 2018-74 modifies the two safe harbor explanations in
Notice 2014-74, 2014-50 I.R.B. 937, that may be used to
satisfy the requirement under § 402(f) of the Internal Revenue
Code that certain information be provided to recipients of
eligible rollover distributions. The safe harbor explanations as
modified by this notice take into consideration certain legisla-
tive changes and recent guidance, including changes related to
qualified plan loan offsets (as defined in section 13613 of the
Tax Cuts and Jobs Act of 2017, P.L. 115-97) and guidance
issued on self-certification of eligibility for a waiver of the
deadline for completing a rollover (described in Rev. Proc.
2016-47, 2016-37 I.R.B. 346), and include other clarifying
changes.

## Income Tax

### REV. RUL. 2018-26, page 520.

Fringe benefits aircraft valuation formula. For purposes of
section 1.61-21(g) of the Income Tax Regulations, relating to
the rule for valuing non-commercial flights on employer-
provided aircraft, the Standard Industry Fare Level (SIFL) cents-
per-mile rates and terminal charge in effect for the second half
of 2018 are set forth.

### REV. PROC. 2018-48, page 521.

This revenue procedure provides guidance for real estate in-
vestment trusts (REITs) regarding the treatment of certain
foreign income inclusions for purposes of the 95 percent gross
income qualification test of section 856(c)(2) of the Internal
Revenue Code.

### Notice 2018-72, page 522.

This Notice announces that Treasury and the IRS intent to
amend regulations under section 871(m) to delay the effective/
applicability date of certain rules in those final regulations. This
Notice also extends the phase-in period provided in Notice
2017-42, 2017-34 I.R.B. 212, and Notice 2018-5,
2018-6.

Finding Lists begin on page ii.

## The IRS Mission

Provide America's taxpayers top-quality service by helping
them understand and meet their tax responsibilities and en-
force the law with integrity and fairness to all.

## Introduction

The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly.

It is the policy of the Service to publish in the Bulletin all
substantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of internal
management are not published; however, statements of inter-
nal practices and procedures that affect the rights and duties
of taxpayers are published.

Revenue rulings represent the conclusions of the Service on
the application of the law to the pivotal facts stated in the
revenue ruling. In those based on positions taken in rulings to
taxpayers or technical advice to Service field offices, identify-
ing details and information of a confidential nature are deleted
to prevent unwarranted invasions of privacy and to comply with
statutory requirements.

Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

### Part I .- 1986 Code.

This part includes rulings and decisions based on provisions of
the Internal Revenue Code of 1986.

### Part II .- Treaties and Tax Legislation.

This part is divided into two subparts as follows: Subpart A, Tax
Conventions and Other Related Items, and Subpart B, Legisla-
tion and Related Committee Reports.

Part III .- Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury's Office of the Assistant Sec-
retary (Enforcement).

### Part IV .- Items of General Interest.

This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative index for
the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

# Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

26 CFR 1.61-21: Taxation of fringe benefits.

## Rev. Rul. 2018-26

For purposes of the taxation of fringe
benefits under section 61 of the Internal
Revenue Code, section 1.61-21(g) of the
Income Tax Regulations provides a rule
for valuing noncommercial flights on

employer-provided aircraft. Section 1.61-
21(g)(5) provides an aircraft valuation
formula to determine the value of such
flights. The value of a flight is determined
under the base aircraft valuation formula
(also known as the Standard Industry Fare
Level formula or SIFL) by multiplying the
SIFL cents-per-mile rates applicable for the
period during which the flight was taken by

the appropriate aircraft multiple provided in
section 1.61-21(g)(7) and then adding the
applicable terminal charge. The SIFL cents-
per-mile rates in the formula and the termi-
nal charge are calculated by the Department
of Transportation and are reviewed semi-
annually.

The following chart sets forth the ter-
minal charge and SIFL mileage rates:

Period During Which the
Flight Is Taken
7/1/18 - 12/31/18

Terminal Charge
$42.88

SIFL Mileage Rates
Up to 500 miles = $.2346 per mile
501-1500 miles = $.1788 per mile
Over 1500 miles = $.1719 per mile

## DRAFTING INFORMATION

The principal author of this revenue
ruling is Kathleen Edmondson of the Of-

fice of Associate Chief Counsel (Tax Ex-
empt/Government Entities). For further
information regarding this revenue ruling,

contact Ms. Edmondson at (202) 317-
6798 (not a toll-free number).

# Part III. Administrative, Procedural, and Miscellaneous

26 CFR § 601.105: Examination of returns and
claims for refund, credit or abatement; determina-
tion of correct tax liability.
(Also: Part 1, §§ 856, 951, 951A, 986, 1291, 1293,
1296)

## Rev. Proc. 2018-48 SECTION 1. PURPOSE

This revenue procedure provides guid-
ance regarding how certain items of in-
come are treated for purposes of determin-
ing whether a real estate investment trust
(REIT) satisfies the gross income test in
§ 856(c)(2) of the Internal Revenue Code
(Code). The types of income addressed
are-

· Amounts required to be included in
gross income under §§ 951(a)(1) (ex-
cept by reason of § 965), 951A(a),
1291(a), 1293(a)(1), and 1296(a); and

· Amounts required to be taken into ac-
count under § 986(c) as foreign cur-
rency gain with respect to distributions
of previously taxed earnings and prof-
its.

## SECTION 2. BACKGROUND

.01 To qualify as a REIT, a domestic
corporation must, among other things, an-
nually satisfy the gross income require-
ments of § 856(c)(2) and (c)(3). Under
§ 856(c)(2), at least 95 percent of the
corporation's gross income must be de-
rived from certain enumerated sources, in-
cluding dividends, interest, rents from real
property, and gain from the sale or other
disposition of stock, securities, and real
property. Under § 856(c)(3), at least 75
percent of the corporation's gross income
must be derived from a similar but nar-
rower set of enumerated sources, gener-
ally focused on income from real estate
assets.

.02 The legislative history underlying
the tax treatment of REITs indicates that a
central concern behind the gross income
restrictions is that a REIT's gross income
should largely be composed of passive
income. For example, H.R. Rep. No. 86-
2020, at 6 (1960), 1960-2 C.B. 819, at
822-23 states, "One of the principal pur-
poses of your committee in imposing re-
strictions on types of income of a quali-

fying real estate investment trust is to be
sure the bulk of its income is from passive
income sources and not from the active
conduct of a trade or business."

.03 Section 856(c)(5)(J) provides that to
the extent necessary to carry out the pur-
poses of part II of subchapter M (§§ 856
through 859 of the Code), the Secretary is
authorized to determine, solely for purposes
of such part, (i) whether any item of income
or gain that does not otherwise qualify under
§ 856(c)(2) or (c)(3) may be considered as
not constituting gross income for purposes
of § 856(c)(2) or (c)(3), and (ii) whether any
item of income or gain that otherwise con-
stitutes gross income not qualifying under
§ 856(c)(2) or (c)(3) may be considered as
gross income that qualifies under § 856(c)
(2) or (c)(3).

.04 Some REITs are United States
shareholders, as defined in § 951(b), in
one or more controlled foreign corpora-
tions (CFCs), as defined in § 957. REITs
may also own stock in domestic partner-
ships or trusts that are United States share-
holders of CFCs. Additionally, some
REITs own (or are treated under § 1298 as
owning) stock in one or more foreign cor-
porations that are passive foreign invest-
ment companies (PFICs), as defined in
§ 1297. A United States person owning
stock (or treated as owning stock) in a
foreign corporation may be required under
subpart F of part III of subchapter N
(§§ 951 to 965 of the Code) or under part
VI of subchapter P (§§ 1291 to 1298 of
the Code) to include in gross income cer-
tain types of income or earnings of the
foreign corporation. This inclusion may
be required without regard to whether the
foreign corporation makes a correspond-
ing distribution of cash or property to the
United States person.

.05 Section 986(c)(1) provides that for-
eign currency gain or loss with respect to
distributions of previously taxed earnings
and profits (as described in § 959 or
§ 1293(c)) attributable to movements in
exchange rates between the times of the
deemed and actual distribution shall be
recognized and treated as ordinary income
or loss from the same source as the asso-
ciated income inclusion.

.06 Section 856(n)(1)(A) provides that
passive foreign exchange gain (as defined

in § 856(n)(3)) for any taxable year shall
not constitute gross income for purposes
of § 856(c)(2). In addition to the items
specifically listed in § 856(n)(3)(A) and
(B), under § 856(n)(3)(C), passive foreign
exchange gain includes any other foreign
currency gain as determined by the Sec-
retary.

.07 The amounts that a REIT may be
required to include in gross income
under §§ 951(a)(1), 951A(a), 986(c),
1291(a), 1293(a)(1), or 1296(a) are not
listed among the qualifying sources enu-
merated in § 856(c)(2) or (c)(3). However,
§ 965(m)(1)(A) provides that amounts re-
quired to be included in gross income under
§ 951(a) by reason of § 965(a) are not taken
into account as gross income of a REIT for
purposes of applying § 856(c)(2) and (3).
Additionally, amounts included in gross in-
come under § 986(c) are not listed in
§ 856(n)(3)(A) or (B).

.08 Previously, the Internal Revenue Ser-
vice (IRS) received requests to exercise the
authority under § 856(c)(5)(J) and (n)(3)(C)
to treat certain amounts determined un-
der §§ 951(a)(1), 986(c), 1291(a), and
1293(a)(1) either as not constituting
gross income or as qualifying gross in-
come, for purposes of § 856(c)(2).

.09 Since § 951A was added to the
Code by "An Act to provide for reconcil-
iation pursuant to titles II and V of the
concurrent resolution on the budget for
fiscal year 2018," P.L. 115-97, 131 Stat.
2054 (2017), the IRS has received similar
requests to exercise the authority under
§ 856(c)(5)(J) and (n)(3)(C) regarding
REIT income inclusions and foreign cur-
rency gain with respect to global intangi-
ble low-taxed income (GILTI) under
§ 951A(a).

## SECTION 3. SCOPE

This revenue procedure applies to any
REIT that is required to include in gross
income amounts under §§ 951(a)(1) (ex-
cept by reason of § 965), 951A(a), 986(c),
1291(a), 1293(a)(1), or 1296(a).

## SECTION 4. APPLICATION

.01 Pursuant to § 856(c)(5)(J)(ii), any
amounts required to be included in gross
income by a REIT under §§ 951(a)(1)

(except by reason of § 965), 951A(a),
1291(a), 1293(a)(1), or 1296(a) are treated
as qualifying income for purposes of
§ 856(c)(2).

.02 Pursuant to § 856(n)(3)(C), any
amounts required to be taken into account
by a REIT under § 986(c) as foreign cur-
rency gain with respect to distributions of
previously taxed earnings and profits (as
described in § 959 or § 1293(c)) are con-
sidered passive foreign exchange gain
(as defined in § 856(n)(3)) and, there-
fore, pursuant to § 856(n)(1)(A), do not
constitute gross income for purposes of
§ 856(c)(2).

## SECTION 5. EFFECTIVE DATE

This revenue procedure is effective for
taxable years beginning after September
13, 2018. However, a REIT described in
section 3 of this revenue procedure may
choose to apply the rules set forth in sec-
tion 4 of this revenue procedure with re-
spect to any prior taxable year(s).

## SECTION 6. DRAFTING INFORMATION

The principal authors of this revenue
procedure are Grace Cho and Anna Boyd
of the Office of Associate Chief Counsel
(Financial Institutions & Products). For
further information regarding this revenue
procedure contact Ms. Cho at (202) 317-
6945 (not a toll-free number).

## Section 856 .- Definition of real estate investment trust

For purposes of determining whether a real estate
investment trust (REIT) satisfies the gross income
test in § 856(c)(2) of the Internal Revenue Code,
how may a REIT treat amounts required to be in-
cluded in gross income under §§ 951(a)(1) (except
by reason of § 965), 951A(a), 1291(a), 1293(a)(1),
1296(a), and amounts required to be taken into ac-
count under § 986(c) as foreign currency gain with
respect to distributions of previously taxed earnings
and profits. See Rev. Proc. 2018-48, page 521.

## Section 951 .- Amounts included in gross income of United States shareholders

## Section 951A .- Global intangible low-taxed income included in gross income of United States shareholders

## Section 986 .- Determina- tion of foreign taxes and foreign corporation's earnings and profits

# Section 1291 .- Interest on tax deferral

For purposes of determining whether a real estate
investment trust (REIT) satisfies the gross income
test in § 856(c)(2) of the Internal Revenue Code,

how may a REIT treat amounts required to be in-
cluded in gross income under §§ 951(a)(1) (except
by reason of § 965), 951A(a), 1291(a), 1293(a)(1),
1296(a), and amounts required to be taken into ac-
count under § 986(c) as foreign currency gain with
respect to distributions of previously taxed earnings
and profits. See Rev. Proc. 2018-48, page 521.

# Section 1293 .- Election of mark to market for marketable stock

# Section 1296 .- Interest on tax deferral

## Extension of the Phase-in Period for the Enforcement and Administration of Section 871(m)

### Notice 2018-72

#### I. PURPOSE

This Notice provides taxpayers with
additional guidance for complying with
the final and temporary regulations under
sections 871(m), 1441, 1461, and 1473 of
the Internal Revenue Code (the Code)
(collectively referred to as the section
871(m) regulations) in 2019,1 2020, and
2021. Specifically, this Notice announces
that the Department of the Treasury (Trea-

sury Department) and the Internal Reve-
nue Service (IRS) intend to amend the
section 871(m) regulations to delay the
effective/applicability date of certain rules
in those final regulations. This Notice also
extends the phase-in period provided in No-
tice 2016-76, 2016-51 I.R.B. 834, for cer-
tain provisions of the section 871(m) regu-
lations and permits withholding agents
to apply the transition rules from Notice
2010-46, 2010-24 I.R.B. 757, in 2020, as
described in more detail below.

The anti-abuse rule provided in
§1.871-15(o) will continue to apply dur-
ing the phase-in years described in this
Notice. As a result, a transaction that
would not otherwise be treated as a sec-
tion 871(m) transaction (including as a
result of this Notice) may be a section
871(m) transaction under §1.871-15(0).2

#### II. BACKGROUND

On June 14, 2010, the Treasury De-
partment and the IRS published Notice
2010-46, which addresses potential over-
withholding in the context of securities
lending and sale repurchase agreements.
Notice 2010-46 provides a two-part so-
lution to the problem of overwithholding
on a chain of dividends and dividend
equivalents. First, it provides an exception
from withholding for payments to a qual-
ified securities lender (QSL). Second, it
provides a proposed framework to credit
forward prior withholding on a chain of
substitute dividends paid pursuant to a
chain of securities loans or stock repur-
chase agreements. The QSL regime re-
quires a person that agrees to act as a QSL
to comply with certain withholding and
documentation requirements. The Trea-
sury Department and the IRS permitted
withholding agents to rely on transition
rules described in Notice 2010-46, Part
III, until guidance was developed that
would include documentation and sub-
stantiation of withholding.

On September 18, 2015, the Federal
Register published final regulations and
temporary regulations (TD 9734, 80 FR
56866), which finalized a portion of a
2013 notice of proposed rulemaking (78
FR 73128), and introduced new temporary
regulations based on comments received

with respect to that notice of proposed
rulemaking (80 FR 56415) (2015 final
regulations and 2015 temporary regula-
tions, respectively). The Treasury Depart-
ment and the IRS stated in the preamble
that the final qualified derivatives dealer
("QDD") regulations would supplant the
proposed regulatory framework described
in Notice 2010-46. 80 FR at 56878.

On July 18, 2016, the Treasury Depart-
ment and the IRS published Notice 2016-
42, 2016-29 I.R.B. 67, which contained
the proposed qualified intermediary agree-
ment (QI Agreement) that included provi-
sions relating to the QDD regime and re-
iterated the intent to replace the proposed
regulatory framework described in Notice
2010-46 with the QDD regime.

On December 19, 2016, the Treasury
Department and the IRS published Notice
2016-76, which provided for the phased-in
application of certain provisions of the sec-
tion 871(m) regulations to allow for the or-
derly implementation of those final regula-
tions and announced that taxpayers may
continue to rely on Notice 2010-46 until
January 1, 2018.

On January 17, 2017, the Treasury De-
partment and the IRS published Revenue
Procedure 2017-15, 2017-3 I.R.B. 437,
which sets forth the final QI Agreement
(2017 QI Agreement), including the re-
quirements and obligations applicable to
QDDs, and provided that taxpayers may
continue to rely on Notice 2010-46 dur-
ing 2017.

On January 24, 2017, the Federal Reg-
ister published final regulations and tem-
porary regulations (TD 9815, 82 FR 8144)
(the 2017 regulations), which finalized the
2015 notice of proposed rulemaking (80
FR 56415) that was issued in conjunction
with the 2015 temporary regulations. The
effective/applicability dates in the 2017
regulations reflect the phased-in applica-
tion described in Notice 2016-76. See
Treas. Reg. §1.871-15(r)(3). Also, con-
sistent with Notice 2016-76 and other
announcements, the "Effect on Other
Documents" section of the preamble to
the 2017 regulations obsoleted Notice
2010-46 as of January 1, 2018. In re-
sponse to a comment requesting that the
QSL regime remain, the preamble to
the 2017 regulations noted that "[w]hile

the Treasury Department and the IRS un-
derstand that the QSL regime was admin-
istratively more convenient for taxpayers
than the QI regime, it created administra-
bility problems, particularly with respect
to verification, for the IRS. That regime is
being replaced by incorporating the QDD
rules into the existing QI framework, in-
cluding the specific rules for pooled re-
porting on Form 1042-S, and the QI re-
quirements for compliance review and
certification." 82 FR at 8153.

On August 21, 2017, the Treasury De-
partment and the IRS published Notice
2017-42, 2017-34 I.R.B. 212, which ex-
tended certain transition relief.

On February 5, 2018, the Treasury De-
partment and the IRS published Notice
2018-5, 2018-6 I.R.B. 341, which per-
mits withholding agents to apply the tran-
sition rules from Notice 2010-46 in 2018
and 2019.

Consistent with Executive Order 13777
(82 FR 12285), the Treasury Department
and the IRS continue to evaluate the section
871(m) regulations and consider possible
agency actions that may reduce unnecessary
burdens imposed by the regulations. Pend-
ing consideration of the section 871(m) reg-
ulations pursuant to Executive Order 13777,
this Notice extends parts of the phase-in
period described in both Notice 2017-42
and Notice 2018-5 through 2020. See sec-
tions III through VI of this Notice for more
details.

Dealers, issuers, and other withholding
agents have indicated that the phase-in
period for delta-one transactions provided
in prior guidance has provided them with
valuable time to test and further develop
their withholding and reporting systems.
Furthermore, comments have requested
that the transition relief described in both
Notice 2017-42 and Notice 2018-5
should be extended on a permanent basis.
Market participants have indicated that
they will require additional time to refine
their systems based on any amendments
to the section 871(m) regulations. In ad-
dition, dealers, issuers, and other with-
holding agents continue to design, build,
and test new withholding and reporting
systems that will enable testing and with-
holding on non-delta-one transactions,
and have requested additional time to

2The terms used in this Notice have the meanings provided in the section 871(m) regulations.

complete those systems before being re-
quired to comply with the section 871(m)
regulations with respect to non-delta-one
transactions. Further, comments have re-
quested that the QSL regime be extended
for a longer transition period and have
requested that the Treasury Department
and the IRS consider simplifying the rules
for securities lenders.

## III. EXTENSION OF THE PHASE-IN YEAR FOR DELTA-ONE AND NON-DELTA-ONE TRANSACTIONS

This section describes the extension to
the phased-in application of the section
871(m) regulations to delta-one and non-
delta-one transactions. This Notice does
not apply to any transaction that is a
section 871(m) transaction pursuant to
§1.871-15(d)(1) (providing that before
January 1, 2017, a notional principal con-
tract (NPC) is a specified NPC if certain
factors are present).

The Treasury Department and the IRS
have determined that it is appropriate for
taxpayers and withholding agents to delay
certain provisions in the section 871(m)
regulations for non-delta-one transactions,
including transactions that are combined
transactions under §1.871-15(n). There-
fore, the Treasury Department and the IRS
intend to revise the effective/applicability
date for §1.871-15(d)(2) and (e) to pro-
vide that these rules will not apply to any
payment made with respect to any non-
delta-one transaction issued before Janu-
ary 1, 2021.

Notice 2016-76 provides that the IRS
will take into account the extent to which
the taxpayer or withholding agent made a
good faith effort to comply with the sec-
tion 871(m) regulations with respect to
delta-one transactions in 2017 and non-
delta-one transactions in 2018 when it en-
forces the section 871(m) regulations. No-
tice 2017-42 extended the period during
which the good faith effort standard ap-
plied to (1) any delta-one transaction in
2017 and 2018, and (2) any non-delta-one
transaction that is a section 871(m) trans-
action pursuant to §1.871-15(d)(2) or (e)
in 2019. This Notice further extends the
periods during which the enforcement
standards provided by Notice 2016-76
and Notice 2017-42 will apply. Consis-
tent with this extension, the IRS will take
into account the extent to which the tax-

payer or withholding agent made a good
faith effort to comply with the section
871(m) regulations in enforcing the sec-
tion 871(m) regulations for (1) any delta-
one transaction in 2017 through 2020, and
(2) any non-delta-one transaction that is a
section 871(m) transaction pursuant to
§1.871-15(d)(2) or (e) in 2021.

Similarly, for purposes of the IRS's
enforcement and administration of the
QDD rules in the section 871(m) regula-
tions and the relevant provisions of the
2017 QI Agreement, this Notice extends
through 2020 the period during which the
IRS will take into account the extent to
which the QDD made a good faith effort
to comply with the section 871(m) regu-
lations and the relevant provisions of the
2017 QI Agreement. In addition, the IRS
intends to revise the 2017 QI Agreement
to provide that a QDD will be considered
to satisfy the obligations that apply spe-
cifically to a QDD under that agreement
for 2017 through 2020 provided that the
QDD makes a good faith effort to comply
with the relevant provisions of the 2017
QI Agreement.

### IV. EXTENSION OF THE SIMPLIFIED STANDARD FOR DETERMINING WHETHER TRANSACTIONS ARE COMBINED TRANSACTIONS

Notice 2016-76 provided a simplified
standard for withholding agents to deter-
mine whether transactions entered into in
2017 are combined transactions. Specifi-
cally, a withholding agent is required to
combine transactions entered into in 2017
for purposes of determining whether the
transactions are section 871(m) transac-
tions only when the transactions are over-
the-counter transactions that are priced,
marketed, or sold in connection with each
other. Withholding agents are not required
to combine any transactions that are listed
securities entered into in 2017.

Notice 2017-42 extended the period
during which this simplified standard for
combined transactions applies to include
2018. This Notice further extends the pe-
riod during which this simplified standard
for combined transactions applies to in-
clude 2019 and 2020. Transactions that
are entered into in 2017 through 2020 that
are combined under this simplified stan-
dard will continue to be treated as com-

bined transactions for future years and
will not cease to be combined transactions
as a result of applying §1.871-15(n) or
disposing of less than all of the potential
section 871(m) transactions that are com-
bined under this rule. Transactions that are
entered into in 2017 through 2020 that are
not combined under this simplified stan-
dard will not become combined transac-
tions as a result of applying §1.871-
15(n) to these transactions in future years,
unless a reissuance or other event causes
the transactions to be retested to deter-
mine whether they are section 871(m)
transactions. See §1.871-15(g)(2) (pro-
viding that the delta of a potential section
871(m) transaction generally is deter-
mined on the earlier of when the transac-
tion is (1) priced or (2) issued); see also
§1.871-15(a)(6) (defining the term "is-
sue" to include "an issuance as a result of
a deemed exchange pursuant to section
1001"). This simplified standard applies
only to withholding agents, and does not
apply to taxpayers that are long parties to
potential section 871(m) transactions.

## V. EXTENSION OF PHASE-IN RELIEF FOR QUALIFIED DERIVATIVES DEALERS

Section 1.871-15T(q)(1) of the 2015
temporary regulations provided that when
a QDD received a dividend or dividend
equivalent payment and the QDD was
contractually obligated to make an offset-
ting dividend equivalent payment on the
same underlying security in an amount
that was less than the dividend and divi-
dend equivalent amount received, the
QDD would be liable for tax under section
871(a) or section 881 for the difference.
The 2015 final regulations provided that a
withholding agent who made a payment
of a dividend to a qualified intermediary
acting as a QDD was not required to with-
hold on that payment if the withholding
agent reliably associated the payment with
a valid qualified intermediary withholding
form containing a certification described
in §1.1441-1(e)(3)(ii)(E). See §1.1441-
1(b)(4)(xxii) of the 2015 final regulations.

Comments requested that the Treasury
Department and the IRS adopt a different
method of determining a QDD's tax
liability. Those comments generally re-
quested that this method be based on the
QDD's net delta exposure for each under-

lying security. The Treasury Department
and the IRS agreed that the net delta ap-
proach was an administrable and accurate
method for a QDD to determine its resid-
ual exposure to underlying securities, and
the 2017 final regulations adopted the net
delta exposure method.

In adopting the net delta approach, the
Treasury Department and the IRS were
concerned that the exemption from with-
holding on dividends paid to a QDD,
when combined with the net delta expo-
sure method, could result in U.S. source
dividends escaping U.S. tax completely
in certain circumstances. Therefore, the
2017 final regulations revised §§1.871-
15(q)(1) and 1.1441-1(b)(4)(xxii) to pro-
vide that a QDD remains liable for tax
under section 881(a)(1) and subject to
withholding under chapters 3 and 4 on
dividends. However, to allow taxpayers
time to implement the net delta approach,
the 2017 QI Agreement and the 2017 final
regulations provided that dividends and
dividend equivalents received by a QDD
in its equity derivatives dealer capacity in
2017 will not be subject to tax under sec-
tion 881(a)(1) or subject to withholding
under chapters 3 and 4.

Notice 2017-42 announced that the
Treasury Department and the IRS intend
to amend §§1.871-15(q)(1) and (r)(3),
and 1.1441-1(b)(4)(xxii)(C) to provide
that a QDD will not be subject to tax on
dividends and dividend equivalents re-
ceived in 2017 and 2018 in its equity
derivatives dealer capacity or withholding
on those dividends (including deemed
dividends). This Notice announces that
the Treasury Department and the IRS in-
tend to amend those provisions to provide
that a QDD will not be subject to tax on
dividends and dividend equivalents re-
ceived in 2019 and 2020 in its equity
derivatives dealer capacity or withholding
on those dividends (including deemed
dividends) as well.

Section 4.01(1) of Rev. Proc. 2017-15
provides that a QDD will be required to
compute its section 871(m) amount using
the net delta approach beginning in 2018.
Notice 2017-42 provided that a QDD
would be required to compute its section
871(m) amount using the net delta ap-
proach beginning in 2019. This Notice
provides that a QDD will be required to

compute its section 871(m) amount using
the net delta approach beginning in 2021.

A QDD will remain liable for tax under
section 881(a)(1) on dividends and divi-
dend equivalents that it receives in any
capacity other than as an equity deriva-
tives dealer, and on any other U.S. source
FDAP payments that it receives (whether
or not in its equity derivatives dealer ca-
pacity). In addition, a QDD is responsible
for withholding on dividend equivalents it
pays to a foreign person on a section
871(m) transaction, whether acting in its
capacity as an equity derivatives dealer or
otherwise.

Finally, section 10.01(C) of the 2017
QI Agreement provides that: "For calen-
dar year 2017, a QDD is not required to
perform a periodic review with respect to
its QDD activities (as otherwise required
by section 10.04 of this Agreement) or
provide the factual information specified
in Appendix I." Notice 2017-42 provides
that a QDD is not required to perform a
periodic review with respect to its QDD
activities for 2017 or 2018. This Notice
provides that a QDD is not required to
perform a periodic review with respect to
its QDD activities for 2019 or 2020. Note
that a QDD must use the same year for the
periodic review of its QI activities and its
QDD activities. A QI that is a QDD must
choose 2021 or a later year within its
certification period in which to perform its
periodic review unless its applicable cer-
tification period ends in 2020 or an earlier
year.

## VI. EXTENSION OF TRANSITION RULES FROM NOTICE 2010-46

Notice 2018-5 provided that notwith-
standing the preamble to the 2017 regula-
tions, withholding agents may apply the
transition rules described in Notice 2010-
46, Part III, for payments made in 2018
and 2019. This Notice provides that with-
holding agents may also apply the transi-
tion rules described in Notice 2010-46,
Part III, for payments made in 2020.

## VII. TAXPAYER RELIANCE

Before the promulgation of the amend-
ments to the section 871(m) regulations
and the 2017 QI Agreement, taxpayers
may rely on the provisions of this Notice
regarding the proposed amendments de-

scribed in sections III and V. Withholding
agents may rely on the simplified standard
for determining whether transactions are
combined transactions as described in sec-
tion IV and may apply the QSL transition
rules described in section VI.

## VIII. DRAFTING INFORMATION

The principal authors of this Notice are
Karen Walny and Peter Merkel of the
Office of Associate Chief Counsel (Inter-
national). For further information regard-
ing this Notice, contact Karen Walny or
Peter Merkel at (202) 317-6938 (not a
toll-free number).

# Notice 2018-72 Cross- References

# Section 1 .- TD 9815, 82 FR 8144 (Jan. 24, 2017)

These final and temporary regulations relate to
the treatment of dividend equivalent payments for
purposes of section 871(m) of the Internal Revenue
Code. Section 871(m) treats certain payments made
with respect to securities loans, sale-repurchase
transactions, certain notional principal contracts, and
substantially similar transactions as dividend equiv-
alent payments. Dividend equivalent payments are
treated as actual U.S. source dividends for purposes
of U.S. gross basis taxation and withholding. These
regulations also provide rules relating to the substan-
tial equivalence test for complex contracts and the
rules for qualified derivatives dealers. See Notice
2018-72, page 522.

# Section 2 .- Notice 2017- 42, 2017-34 I.R.B. 212 (Aug. 21, 2017)

The Notice extended the phase-in period for the
application of the final regulations relating dividend
equivalent under section 871(m). The notice pro-
vides that the section 871(m) regulations: (1) only
apply to delta-one transactions in calendar year 2017
and 2018, and (2) will apply to non-delta-one trans-
actions beginning in calendar year 2019. The pro-
posed notice also provides phased-in enforcement of
the section 871(m) regulations, including the quali-
fied derivatives dealer rules. See Notice 2018-72,
page 522.

# Section 3 .- Notice 2018- 5, 2018-6 I.R.B. 341 (Feb. 5, 2018)

The final section 871(m) regulations replaced the
qualified securities lender regime with the qualified
derivatives dealer effective January 1, 2018, and the
preamble obsoleted Notice 2010-46 as of January 1,
2018. The Notice provide that withholding agents
would be permitted to use the qualified securities
lender regime in calendar years 2018 and 2019. See
Notice 2018-72, page 522.

# Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates Notice 2018-73

This notice provides guidance on the
corporate bond monthly yield curve, the
corresponding spot segment rates used un-
der § 417(e)(3), and the 24-month average
segment rates under § 430(h)(2) of the
Internal Revenue Code. In addition, this
notice provides guidance as to the interest
rate on 30-year Treasury securities under
§ 417(e)(3)(A)(ii)(II) as in effect for plan
years beginning before 2008 and the 30-
year Treasury weighted average rate un-
der § 431(c)(6)(E)(ii)(I).

# YIELD CURVE AND SEGMENT RATES

Section 430 specifies the minimum
funding requirements that apply to single-
employer plans (except for CSEC plans
under § 414(y)) pursuant to § 412. Section
430(h)(2) specifies the interest rates that
must be used to determine a plan's target
normal cost and funding target. Under this
provision, present value is generally de-
termined using three 24-month average
interest rates ("segment rates"), each of
which applies to cash flows during speci-
fied periods. To the extent provided under
§ 430(h)(2)(C)(iv), these segment rates
are adjusted by the applicable percentage
of the 25-year average segment rates for
the period ending September 30 of the
year preceding the calendar year in which
the plan year begins.3 However, an elec-
tion may be made under § 430(h)(2)(D)
(ii) to use the monthly yield curve in place
of the segment rates.

Notice 2007-81, 2007-44 I.R.B. 899,
provides guidelines for determining the
monthly corporate bond yield curve, and
the 24-month average corporate bond seg-
ment rates used to compute the target nor-
mal cost and the funding target. Consis-
tent with the methodology specified in
Notice 2007-81, the monthly corporate
bond yield curve derived from August
2018 data is in Table 2018-8 at the end of

this notice. The spot first, second, and
third segment rates for the month of Au-
gust 2018 are, respectively, 3.10, 4.15,
and 4.46.

The 24-month average segment rates de-
termined under § 430(h)(2)(C)(i) through
(iii) must be adjusted pursuant to § 430(h)
(2)(C)(iv) to be within the applicable mini-
mum and maximum percentages of the
corresponding 25-year average segment
rates. For plan years beginning before
2021, the applicable minimum percent-
age is 90% and the applicable maximum
percentage is 110%. The 25-year aver-
age segment rates for plan years begin-
ning in 2017 and 2018 were published in
Notice 2016-54, 2016-40 I.R.B. 429
and Notice 2017-50, 2017-41 I.R.B.
280, respectively. For plan years begin-
ning in 2019, based on the segment rates
applicable for October 1993 to Septem-
ber 2018, the 25-year averages for the
period ending September 30, 2018, of
the first, second, and third segment rates
are 4.15, 5.94, and 6.79 percent, respec-
tively.

# 24-MONTH AVERAGE CORPORATE BOND SEGMENT RATES

The three 24-month average corporate
bond segment rates applicable for Sep-
tember 2018 without adjustment for the
25-year average segment rate limits are as
follows:

24-Month Average Segment Rates Without 25-Year Average Adjustment

Applicable Month First Segment

Second Segment

Third Segment

September 2018 2.28

3.81

4.46

Based on § 430(h)(2)(C)(iv), the 24-
month averages applicable for September

2018, adjusted to be within the applicable
minimum and maximum percentages of

the corresponding 25-year average seg-
ment rates, are as follows:

Adjusted 24-Month Average Segment Rates

For Plan Years Beginning In

Applicable Month

First Segment

Second Segment

Third Segment

2017

September 2018

4.16

5.72

6.48

2018

September 2018

3.92

5.52

6.29

2019

September 2018

3.74

5.35

6.11

3Pursuant to § 433(h)(3)(A), the 3rd segment rate determined under § 430(h)(2)(C) is used to determine the current liability of a CSEC plan (which is used to calculate the minimum amount
of the full funding limitation under § 433(c)(7)(C)).

# 30-YEAR TREASURY SECURITIES INTEREST RATES

Section 431 specifies the minimum fund-
ing requirements that apply to multiem-
ployer plans pursuant to § 412. Section
431(c)(6)(B) specifies a minimum amount
for the full-funding limitation described in
§ 431(c)(6)(A), based on the plan's current
liability. Section 431(c)(6)(E)(ii)(I) provides
that the interest rate used to calculate current
liability for this purpose must be no more

than 5 percent above and no more than 10
percent below the weighted average of the
rates of interest on 30-year Treasury securi-
ties during the four-year period ending on
the last day before the beginning of the plan
year. Notice 88-73, 1988-2 C.B. 383, pro-
vides guidelines for determining the
weighted average interest rate. The rate of
interest on 30-year Treasury securities for
August 2018 is 3.04 percent. The Service
determined this rate as the average of the
daily determinations of yield on the 30-year

Treasury bond maturing in May 2048 deter-
mined each day through August 8, 2018 and
the yield on the 30-year Treasury bond ma-
turing in August 2048 determined each day
for the balance of the month. For plan years
beginning in September 2018, the weighted
average of the rates of interest on 30-year
Treasury securities and the permissible
range of rates used to calculate current lia-
bility are as follows:

For Plan Years Beginning In

Treasury Weighted Average Rates

Permissible Range 90% to 105%

30-Year Treasury Weighted Average

September 2018

2.87

2.58 to 3.01

## MINIMUM PRESENT VALUE SEGMENT RATES

In general, the applicable interest rates
under § 417(e)(3)(D) are segment rates

computed without regard to a 24-month
average. Notice 2007-81 provides guide-
lines for determining the minimum pres-
ent value segment rates. Pursuant to that
notice, the minimum present value seg-

ment rates determined for August 2018
are as follows:

Month

Minimum Present Value Segment Rates

First Segment

Second Segment

Third Segment

August 2018

3.10

4.15

4.46

## DRAFTING INFORMATION

The principal author of this notice is
Tom Morgan of the Office of the Associ-

ate Chief Counsel (Tax Exempt and Gov-
ernment Entities). However, other person-
nel from the IRS participated in the
development of this guidance. For further

information regarding this notice, contact
Mr. Morgan at 202-317-6700 or Paul
Stern at 202-317-8702 (not toll-free num-
bers).

# Table 2018-8 Monthly Yield Curve for August 2018 Derived from August 2018 Data

Maturity

Yield

Maturity

Yield

Maturity

Yield

Maturity

Yield

Maturity

Yield

0.5

2.52

20.5

4.43

40.5

4.46

60.5

4.48

80.5

4.48

1.0

2.74

21.0

4.43

41.0

4.46

61.0

4.48

81.0

4.48

1.5

2.93

21.5

4.43

41.5

4.46

61.5

4.48

81.5

4.48

2.0

3.07

22.0

4.43

42.0

4.46

62.0

4.48

82.0

4.48

2.5

3.16

22.5

4.43

42.5

4.46

62.5

4.48

82.5

4.48

3.0

3.23

23.0

4.43

43.0

4.46

63.0

4.48

83.0

4.48

3.5

3.27

23.5

4.43

43.5

4.46

63.5

4.48

83.5

4.48

4.0

3.32

24.0

4.43

44.0

4.46

64.0

4.48

84.0

4.48

4.5

3.37

24.5

4.43

44.5

4.46

64.5

4.48

84.5

4.49

5.0

3.42

25.0

4.43

45.0

4.46

65.0

4.48

85.0

4.49

5.5

3.48

25.5

4.43

45.5

4.46

65.5

4.48

85.5

4.49

6.0

3.54

26.0

4.43

46.0

4.47

66.0

4.48

86.0

4.49

6.5

3.61

26.5

4.43

46.5

4.47

66.5

4.48

86.5

4.49

7.0

3.68

27.0

4.44

47.0

4.47

67.0

4.48

87.0

4.49

7.5

3.75

27.5

4.44

47.5

4.47

67.5

4.48

87.5

4.49

8.0

3.82

28.0

4.44

48.0

4.47

68.0

4.48

88.0

4.49

8.5

3.89

28.5

4.44

48.5

4.47

68.5

4.48

88.5

4.49

9.0

3.95

29.0

4.44

49.0

4.47

69.0

4.48

89.0

4.49

9.5

4.01

29.5

4.44

49.5

4.47

69.5

4.48

89.5

4.49

10.0

4.07

30.0

4.44

50.0

4.47

70.0

4.48

90.0

4.49

10.5

4.12

30.5

4.44

50.5

4.47

70.5

4.48

90.5

4.49

11.0

4.16

31.0

4.44

51.0

4.47

71.0

4.48

91.0

4.49

11.5

4.21

31.5

4.45

51.5

4.47

71.5

4.48

91.5

4.49

12.0

4.24

32.0

4.45

52.0

4.47

72.0

4.48

92.0

4.49

12.5

4.27

32.5

4.45

52.5

4.47

72.5

4.48

92.5

4.49

13.0

4.30

33.0

4.45

53.0

4.47

73.0

4.48

93.0

4.49

13.5

4.32

33.5

4.45

53.5

4.47

73.5

4.48

93.5

4.49

14.0

4.34

34.0

4.45

54.0

4.47

74.0

4.48

94.0

4.49

14.5

4.36

34.5

4.45

54.5

4.47

74.5

4.48

94.5

4.49

15.0

4.38

35.0

4.45

55.0

4.47

75.0

4.48

95.0

4.49

15.5

4.39

35.5

4.45

55.5

4.47

75.5

4.48

95.5

4.49

16.0

4.40

36.0

4.45

56.0

4.47

76.0

4.48

96.0

4.49

16.5

4.40

36.5

4.45

56.5

4.47

76.5

4.48

96.5

4.49

17.0

4.41

37.0

4.45

57.0

4.47

77.0

4.48

97.0

4.49

17.5

4.41

37.5

4.46

57.5

4.47

77.5

4.48

97.5

4.49

18.0

4.42

38.0

4.46

58.0

4.47

78.0

4.48

98.0

4.49

18.5

4.42

38.5

4.46

58.5

4.47

78.5

4.48

98.5

4.49

19.0

4.42

39.0

4.46

59.0

4.47

79.0

4.48

99.0

4.49

19.5

4.43

39.5

4.46

59.5

4.48

79.5

4.48

99.5

4.49

20.0

4.43

40.0

4.46

60.0

4.48

80.0

4.48

100.0

4.49

# Safe Harbor Explanations - Eligible Rollover Distributions

Notice 2018-74

## I. PURPOSE

This notice modifies the two safe har-
bor explanations in Notice 2014-74,
2014-50 I.R.B. 937, that may be used to
satisfy the requirement under § 402(f) of
the Internal Revenue Code ("Code") that
certain information be provided to recipi-
ents of eligible rollover distributions. The
safe harbor explanations as modified by
this notice take into consideration certain
legislative changes and recent guidance,
including changes related to qualified plan
loan offsets (as defined in section 13613
of the Tax Cuts and Jobs Act of 2017
("TCJA"), P.L. 115-97) and guidance is-
sued on self-certification of eligibility for
a waiver of the deadline for completing a
rollover (described in Rev. Proc. 2016-
47, 2016-37 I.R.B. 346), and include
other clarifying changes.

To assist with the implementation of the
modified safe harbor explanations, this no-
tice contains two appendices. Appendix A
contains two model safe harbor explana-
tions: one for distributions that are not from
a designated Roth account, and a second for
distributions from a designated Roth ac-
count. Appendix B provides instructions on
how to amend the safe harbor explanations
contained in Notice 2014-74 to reflect the
revisions included in the modified safe har-
bor explanations in Appendix A.

## II. BACKGROUND

### A. Section 402(f)

Section 402(f) requires the plan admin-
istrator of a plan qualified under § 401(a)
to provide the written explanation de-
scribed in § 402(f)(1) to any recipient of
an eligible rollover distribution, as defined
in § 402(c)(4). In addition, §§ 403(a)
(4)(B) and 457(e)(16)(B) require the plan
administrator of a § 403(a) plan, or an
eligible § 457(b) plan maintained by
a governmental employer described in

§ 457(e)(1)(A), to provide the written ex-
planation to any recipient of an eligible roll-
over distribution. Further, § 403(b)(8)(B)
requires a payor under a § 403(b) plan to
provide the written explanation to any recip-
ient of an eligible rollover distribution.

Section 1.402(f)-1, Q&A-1(a), pro-
vides that the plan administrator of a qual-
ified plan is required, within a reasonable
period of time before making an eligible
rollover distribution, to provide the dis-
tributee with the written explanation de-
scribed in § 402(f) (“§ 402(f) notice").

Notice 2014-74 contains two safe har-
bor explanations that reflect relevant law
as of December 8, 2014: one safe harbor
explanation is for payments not from a
designated Roth account and the other
safe harbor explanation is for payments
from a designated Roth account. Notice
2014-74 provides that the safe harbor ex-
planations may be used by plan adminis-
trators and payors to satisfy § 402(f) to the
extent that the explanations accurately re-
flect current law.

### B. Recent Statutory Changes Related to Qualified Plan Loan Offsets

Section 1.402(c)-2, Q&A-3(a), pro-
vides that, unless specifically excluded, an
eligible rollover distribution means any
distribution to an employee (or to a spou-
sal distributee described in § 1.402(c)-2,
Q&A-12(a)) of all or any portion of the
balance to the credit of the employee in a
qualified plan. Section 1.402(c)-2, Q&A-
3(b), provides that certain distributions
(for example, required minimum distribu-
tions under § 401(a)(9)) are not eligible
rollover distributions.

Section 1.402(c)-2, Q&A-9(a), pro-
vides that a distribution of a plan loan
offset amount (as defined in § 1.402(c)-2,
Q&A-9(b)) is an eligible rollover distri-
bution if it satisfies § 1.402(c)-2, Q&A-3.
Thus, an amount up to the plan loan offset
amount may be rolled over by the em-
ployee (or spousal distributee) to an eligi-
ble retirement plan within the 60-day pe-
riod described in § 402(c)(3), unless the
plan loan offset amount fails to be an

eligible rollover distribution for another
reason.

Section 1.402(c)-2, Q&A-9(b), pro-
vides that a distribution of a plan loan
offset amount is a distribution that occurs
when, under the plan terms governing a
plan loan, the participant's accrued benefit
is reduced (offset) in order to repay the
loan. This can occur when, for example,
the terms governing a plan loan require
that, in the event of an employee's termi-
nation of employment or request for a
distribution, the loan is to be repaid im-
mediately or treated as in default. A plan
loan offset can also occur when, under the
terms of the plan loan, the loan is can-
celed, accelerated, or treated as if it were
in default (for example, when the plan
treats a loan as in default upon an employ-
ee's termination of employment or within
a specified period thereafter). See also
§ 1.72(p)-1, Q&A-13(a)(2). Because a
plan loan offset is an actual distribution
for purposes of the Code, not a deemed
distribution under § 72(p), a plan loan
offset cannot occur prior to a distributable
event. See generally § 1.72(p)-1, Q&A-
13(b).

Section 13613 of the TCJA amended
§ 402(c)(3) of the Code to provide an
extended rollover deadline for qualified
plan loan offset amounts (as defined in
§ 402(c)(3)(C)(ii)). Any portion of a qual-
ified plan loan offset amount (up to the
entire qualified plan loan offset amount)
may be rolled over into an eligible retire-
ment plan by the individual's tax filing
due date (including extensions) for the
taxable year in which the offset occurs.

A qualified plan loan offset amount is
defined in § 402(c)(3)(C)(ii) as a plan loan
offset amount that is distributed from a qual-
ified employer plan to a participant or ben-
eficiary solely by reason of: (1) the termi-
nation of the qualified employer plan, or (2)
the failure to meet the repayment terms of
the loan from such plan because of the sev-
erance from employment of the participant.
Additionally, under § 402(c)(3)(C)(iv), a
qualified plan loan offset may occur only if
the relevant plan loan meets the require-
ments of § 72(p)(2).

### C. Other Recent Statutory Changes1

Section 100121 of the Moving Ahead
for Progress in the 21st Century Act
("MAP-21"), P.L. 112-141, amended
chapters 83 and 84 of title 5 of the United
States Code ("U.S.C."), to permit certain
federal retirees to participate in phased
retirement. MAP-21 amended the Code to
add § 72(t)(2)(A)(viii), which provides that
if an employee participates in phased retire-
ment, any payments made under a phased
retirement annuity under § 8336a(a)(5) or
8412a(a)(5) of title 5 of the U.S.C., or a
composite retirement annuity under
§ 8336a(a)(1) or 8412a(a)(1) of title 5 of
the U.S.C., are excepted from the 10%
additional tax under § 72(t).

Section 2 of the Defending Public
Safety Employees' Retirement Act
("DPSERA"), P.L. 114-26, amended
§ 72(t)(10)(B) with respect to the excep-
tion to the 10% additional tax under
§ 72(t) on early distributions from a
governmental retirement plan for quali-
fied public safety employees who have
reached age 50 by expanding the excep-
tion to include specified federal law en-
forcement officers, customs and border
protection officers, federal firefighters,
and air traffic controllers who have
reached age 50, and eliminating the re-
quirement that the distributions be from a
defined benefit plan. Section 306 of the Pro-
tecting Americans from Tax Hikes Act of
2015, P.L. 114-113, includes a list of fed-
eral governmental employees added to the
definition of qualified public safety em-
ployee in § 72(t)(10)(B).

### D. Other Extensions of 60-Day Rollover Deadline

Rev. Proc. 2016-47 provides guidance
concerning waivers of the 60-day rollover
deadline contained in §§ 402(c)(3) and
408(d)(3). Specifically, it provides for a
self-certification procedure (subject to veri-
fication on audit) that may be used by a
taxpayer claiming, in specified circum-

stances, eligibility for a waiver under
§ 402(c)(3)(B) or 408(d)(3)(I) with respect
to a rollover into a qualified plan or individ-
ual retirement arrangement ("IRA"). A plan
administrator or an IRA trustee generally
may rely on a taxpayer's self-certification in
determining whether a taxpayer has satisfied
the conditions for a waiver of the 60-day
rollover deadline.

Rev. Proc. 2007-56, 2007-2 C.B. 388,
provides a list of time-sensitive acts, the
performance of which may be postponed
under §§ 7508 (relating to service in com-
bat zones or contingency operations) and
7508A (relating to taxpayers affected by a
federally declared disaster or a terroristic
or military action). Rev. Proc. 2007-56
includes on the list of acts that may be
postponed under §§ 7508 and 7508A the
60-day deadline for rolling over an eligible
rollover distribution to an eligible retirement
plan (which includes an IRA). Rev. Proc.
2007-56 does not, by itself, provide any
postponements under § 7508A. Rather, for
taxpayers to be entitled to a postponement
under § 7508A of any act listed in the rev-
enue procedure, the IRS must publish a no-
tice or issue other guidance (including an
IRS News Release) providing relief with
respect to a federally declared disaster or a
terroristic or military action. For example,
News Release TX-2018-05, July 9, 2018,
provides tax relief relating to severe storms
and flooding in Texas.2

## III. MODIFICATIONS TO THE SAFE HARBOR EXPLANATIONS

There are two updated safe harbor ex-
planations appended to this notice (see
Appendix A). The safe harbor explana-
tions modify the safe harbor explanations
in Notice 2014-74 to reflect certain leg-
islative changes and guidance issued after
December 8, 2014, including: (1) the ex-
tended rollover deadline for qualified plan
loan offset amounts under TCJA, (2) the
exception to the 10% additional tax under
§ 72(t) for phased retirement distributions
to certain federal retirees under MAP-21,

(3) the expanded exception to the 10%
additional tax under § 72(t) for specified
federal employees who have reached age
50 under DPSERA, and (4) the self-
certification procedures under Rev. Proc.
2016-47 for claiming eligibility for a
waiver of the deadline for making roll-
overs. The safe harbor explanations also
include other clarifying modifications,
such as modifications clarifying that the
10% additional tax under § 72(t) for early
distributions applies only to amounts
includable in income, explaining how
the rollover rules apply to governmental
§ 457(b) plans that include designated
Roth accounts, clarifying that the general
exception to the 10% additional tax under
§ 72(t) for payments from a governmental
plan made after a qualified public safety
employee separates from service (if the
employee will be at least age 50 in the
year of the separation) is not available for
payments from IRAs, and recognizing the
possibility that taxpayers affected by fed-
erally declared disasters and other events
may have an extended deadline for mak-
ing rollovers. For instructions on how to
amend the safe harbor explanations in No-
tice 2014-74 to reflect these modifica-
tions, see Appendix B. The updated safe
harbor explanations provided in this no-
tice may be used by plan administrators
and payors to satisfy § 402(f). However,
the updated safe harbor explanations will
not satisfy § 402(f) to the extent the ex-
planations are no longer accurate because
of a change in the relevant law occurring
after September 18, 2018.

The first safe harbor explanation re-
flects the rules relating to distributions not
from a designated Roth account. Thus, the
first safe harbor explanation should only
be used for a distribution that is not from
a designated Roth account. The second
safe harbor explanation reflects the rules
relating to distributions from a designated
Roth account. Thus, the second safe har-
bor explanation should only be used for a
distribution from a designated Roth ac-

1 Although not requiring modifications to the safe harbor explanations, section 41104 of the Bipartisan Budget Act of 2018, P.L. 115-123, amended § 6343 of the Code to provide that certain
retirement plan benefits distributed from a plan as a result of an improper levy may, when they are returned to an individual, be eligible to be rolled over into the plan or an IRA. These
amounts may be rolled over by the tax filing due date (not including extensions) for the tax year during which the Internal Revenue Service ("IRS") returns the improperly levied funds to
the individual. As amended, § 6343 provides that, when the IRS returns improperly levied funds, the Secretary of the Treasury will notify the individual that the returned amount may be
eligible to be rolled over.

2For certain disasters, Congress has enacted legislation providing special rules for distributions made on account of the disaster. For information on rules applicable to distributions (and
the ability to repay those distributions) made on account of Hurricane Harvey or Tropical Storm Harvey, Hurricane Irma, Hurricane Maria, the 2017 California wildfires, and certain 2016
disasters, see Publication 976, Disaster Relief. Distributions made on account of these disasters (assuming certain requirements are met) are not treated as eligible rollover distributions for
purposes of § 402(f). See, for example, section 502(a)(6)(A) of the Disaster Tax Relief and Airport and Airway Extension Act of 2017, P.L. 115-63.

count. Both explanations should be pro-
vided to a participant if the participant is
eligible to receive eligible rollover distri-
butions both from a designated Roth ac-
count and from an account other than a
designated Roth account.

The safe harbor explanation in this no-
tice for distributions not from a designated
Roth account meets the requirements of
§ 402(f) for an eligible rollover distribu-
tion that is not from a designated Roth
account if provided to the recipient of the
eligible rollover distribution within a rea-
sonable period of time before the distribu-
tion is made. Similarly, the safe harbor
explanation in this notice for distributions
from a designated Roth account meets the
requirements of § 402(f) for an eligible
rollover distribution from a designated
Roth account if provided to the recipient
of the eligible rollover distribution within
a reasonable period of time before the
distribution is made.

Section 1.402(f)-1, Q&A-2, provides,
in general, that a reasonable period of time
for providing an explanation is no less
than 30 days (subject to waiver) and no
more than 90 days before the date on
which the distribution is made. However,
§ 1.402(f)-1, Q&A-2(a), of the Proposed
Income Tax Regulations, pursuant to sec-
tion 1102(a)(1)(B) of the Pension Protec-
tion Act of 2006, P.L. 109-280, provides

that a notice required to be provided under
§ 402(f) may be provided to a participant
as much as 180 days before the date on
which the distribution is made (or the an-
nuity starting date). These proposed regu-
lations further provide that, with respect to
the extended period for notices, plans may
rely on the proposed regulations for no-
tices provided during the period beginning
on the first day of the first plan year be-
ginning on or after January 1, 2007 and
ending on the effective date of final reg-
ulations. Thus, the § 402(f) notice may be
provided as much as 180 days before the
date on which the distribution is made (or
the annuity starting date).

A plan administrator or payor may cus-
tomize a safe harbor explanation by omit-
ting any information that does not apply to
the plan. For example, if the plan does not
hold after-tax employee contributions, it
would be appropriate to eliminate the sec-
tion "If your payment includes after-tax
contributions" in the explanation for pay-
ments not from a designated Roth ac-
count. Similarly, if the plan does not pro-
vide for distributions of employer stock or
other employer securities, it would be ap-
propriate to eliminate the section "If your
payment includes employer stock that you
do not roll over." Other information that
may not be relevant to a particular plan
includes, for example, the sections "If

your payment is from a governmental sec-
tion 457(b) plan" and "If you are an eli-
gible retired public safety officer and your
payment is used to pay for health cover-
age or qualified long-term care insur-
ance." In addition, the plan administrator
or payor may provide additional informa-
tion with a safe harbor explanation if the
information is not inconsistent with
§ 402(f).

Alternatively, a plan administrator or
payor may satisfy § 402(f) by providing
an explanation that is different from a safe
harbor explanation. Any explanation must
contain the information required by
§ 402(f) and must be written in a manner
designed to be easily understood.

## IV. EFFECT ON OTHER DOCUMENTS

Notice 2014-74 is modified.

## DRAFTING INFORMATION

The principal author of this notice is
Naomi Lehr of the Office of Associate
Chief Counsel (Tax Exempt and Govern-
ment Entities). For further information re-
garding this notice, contact Ms. Lehr at
(202) 317-4102 (not a toll-free number).
* * *

## Appendix A

For Payments Not From a
Designated Roth Account

### YOUR ROLLOVER OPTIONS

You are receiving this notice because all or a portion of a payment you are receiving from the [INSERT NAME OF PLAN] (the "Plan")
is eligible to be rolled over to an IRA or an employer plan. This notice is intended to help you decide whether to do such a rollover.

This notice describes the rollover rules that apply to payments from the Plan that are not from a designated Roth account (a type of
account with special tax rules in some employer plans). If you also receive a payment from a designated Roth account in the Plan,
you will be provided a different notice for that payment, and the Plan administrator or the payor will tell you the amount that is being
paid from each account.

Rules that apply to most payments from a plan are described in the "General Information About Rollovers" section. Special rules
that only apply in certain circumstances are described in the "Special Rules and Options" section.

## GENERAL INFORMATION ABOUT ROLLOVERS

### How can a rollover affect my taxes?

You will be taxed on a payment from the Plan if you do not roll it over. If you are under age 591/2 and do not do a rollover, you
will also have to pay a 10% additional income tax on early distributions (generally, distributions made before age 591/2), unless an
exception applies. However, if you do a rollover, you will not have to pay tax until you receive payments later and the 10% additional
income tax will not apply if those payments are made after you are age 591/2 (or if an exception applies).

### What types of retirement accounts and plans may accept my rollover?

You may roll over the payment to either an IRA (an individual retirement account or individual retirement annuity) or an employer
plan (a tax-qualified plan, section 403(b) plan, or governmental section 457(b) plan) that will accept the rollover. The rules of the
IRA or employer plan that holds the rollover will determine your investment options, fees, and rights to payment from the IRA or
employer plan (for example, no spousal consent rules apply to IRAs and IRAs may not provide loans). Further, the amount rolled
over will become subject to the tax rules that apply to the IRA or employer plan.

### How do I do a rollover?

There are two ways to do a rollover. You can do either a direct rollover or a 60-day rollover.

If you do a direct rollover, the Plan will make the payment directly to your IRA or an employer plan. You should contact the IRA
sponsor or the administrator of the employer plan for information on how to do a direct rollover.

If you do not do a direct rollover, you may still do a rollover by making a deposit into an IRA or eligible employer plan that will
accept it. Generally, you will have 60 days after you receive the payment to make the deposit. If you do not do a direct rollover, the
Plan is required to withhold 20% of the payment for federal income taxes (up to the amount of cash and property received other than
employer stock). This means that, in order to roll over the entire payment in a 60-day rollover, you must use other funds to make
up for the 20% withheld. If you do not roll over the entire amount of the payment, the portion not rolled over will be taxed and will
be subject to the 10% additional income tax on early distributions if you are under age 591/2 (unless an exception applies).

### How much may I roll over?

If you wish to do a rollover, you may roll over all or part of the amount eligible for rollover. Any payment from the Plan is eligible
for rollover, except:

· Certain payments spread over a period of at least 10 years or over your life or life expectancy (or the lives or joint life expectancy
of you and your beneficiary);

· Required minimum distributions after age 701/2 (or after death);

· Hardship distributions;

· ESOP dividends;

· Corrective distributions of contributions that exceed tax law limitations;

· Loans treated as deemed distributions (for example, loans in default due to missed payments before your employment ends);

· Cost of life insurance paid by the Plan;

· Payments of certain automatic enrollment contributions requested to be withdrawn within 90 days of the first contribution; and

· Amounts treated as distributed because of a prohibited allocation of S corporation stock under an ESOP (also, there will generally
be adverse tax consequences if you roll over a distribution of S corporation stock to an IRA).

The Plan administrator or the payor can tell you what portion of a payment is eligible for rollover.

### If I don't do a rollover, will I have to pay the 10% additional income tax on early distributions?

If you are under age 591/2, you will have to pay the 10% additional income tax on early distributions for any payment from the Plan
(including amounts withheld for income tax) that you do not roll over, unless one of the exceptions listed below applies. This tax
applies to the part of the distribution that you must include in income and is in addition to the regular income tax on the payment
not rolled over.

The 10% additional income tax does not apply to the following payments from the Plan:

· Payments made after you separate from service if you will be at least age 55 in the year of the separation;

· Payments that start after you separate from service if paid at least annually in equal or close to equal amounts over your life or life
expectancy (or the lives or joint life expectancy of you and your beneficiary);

· Payments from a governmental plan made after you separate from service if you are a qualified public safety employee and you will
be at least age 50 in the year of the separation;

· Payments made due to disability;

· Payments after your death;

· Payments of ESOP dividends;

· Corrective distributions of contributions that exceed tax law limitations;

· Cost of life insurance paid by the Plan;

· Payments made directly to the government to satisfy a federal tax levy;

· Payments made under a qualified domestic relations order (QDRO);

· Payments up to the amount of your deductible medical expenses (without regard to whether you itemize deductions for the taxable
year);

· Certain payments made while you are on active duty if you were a member of a reserve component called to duty after September
11, 2001 for more than 179 days;

· Payments of certain automatic enrollment contributions requested to be withdrawn within 90 days of the first contribution;

· Payments for certain distributions relating to certain federally declared disasters; and

· Phased retirement payments made to federal employees.

### If I do a rollover to an IRA, will the 10% additional income tax apply to early distributions from the IRA?

If you receive a payment from an IRA when you are under age 591/2, you will have to pay the 10% additional income tax on early
distributions on the part of the distribution that you must include in income, unless an exception applies. In general, the exceptions
to the 10% additional income tax for early distributions from an IRA are the same as the exceptions listed above for early
distributions from a plan. However, there are a few differences for payments from an IRA, including:

· The exception for payments made after you separate from service if you will be at least age 55 in the year of the separation (or age
50 for qualified public safety employees) does not apply.

· The exception for qualified domestic relations orders (QDROs) does not apply (although a special rule applies under which, as part
of a divorce or separation agreement, a tax-free transfer may be made directly to an IRA of a spouse or former spouse).

· The exception for payments made at least annually in equal or close to equal amounts over a specified period applies without regard
to whether you have had a separation from service.

· There are additional exceptions for (1) payments for qualified higher education expenses, (2) payments up to $10,000 used in a
qualified first-time home purchase, and (3) payments for health insurance premiums after you have received unemployment
compensation for 12 consecutive weeks (or would have been eligible to receive unemployment compensation but for self-employed
status).

Will I owe State income taxes?

This notice does not describe any State or local income tax rules (including withholding rules).

## SPECIAL RULES AND OPTIONS

### If your payment includes after-tax contributions

After-tax contributions included in a payment are not taxed. If a payment is only part of your benefit, an allocable portion of your
after-tax contributions is included in the payment, so you cannot take a payment of only after-tax contributions. However, if you have
pre-1987 after-tax contributions maintained in a separate account, a special rule may apply to determine whether the after-tax
contributions are included in a payment. In addition, special rules apply when you do a rollover, as described below.

You may roll over to an IRA a payment that includes after-tax contributions through either a direct rollover or a 60-day rollover.
You must keep track of the aggregate amount of the after-tax contributions in all of your IRAs (in order to determine your taxable
income for later payments from the IRAs). If you do a direct rollover of only a portion of the amount paid from the Plan and at the
same time the rest is paid to you, the portion directly rolled over consists first of the amount that would be taxable if not rolled over.
For example, assume you are receiving a distribution of $12,000, of which $2,000 is after-tax contributions. In this case, if you
directly roll over $10,000 to an IRA that is not a Roth IRA, no amount is taxable because the $2,000 amount not directly rolled over
is treated as being after-tax contributions. If you do a direct rollover of the entire amount paid from the Plan to two or more
destinations at the same time, you can choose which destination receives the after-tax contributions.

If you do a 60-day rollover to an IRA of only a portion of a payment made to you, the after-tax contributions are treated as rolled
over last. For example, assume you are receiving a distribution of $12,000, of which $2,000 is after-tax contributions, and no part
of the distribution is directly rolled over. In this case, if you roll over $10,000 to an IRA that is not a Roth IRA in a 60-day rollover,
no amount is taxable because the $2,000 amount not rolled over is treated as being after-tax contributions.

You may roll over to an employer plan all of a payment that includes after-tax contributions, but only through a direct rollover (and
only if the receiving plan separately accounts for after-tax contributions and is not a governmental section 457(b) plan). You can do
a 60-day rollover to an employer plan of part of a payment that includes after-tax contributions, but only up to the amount of the
payment that would be taxable if not rolled over.

### If you miss the 60-day rollover deadline

deadline. Under certain circumstances, you may claim eligibility for a waiver of the 60-day rollover deadline by making a written
self-certification. Otherwise, to apply for a waiver from the IRS, you must file a private letter ruling request with the IRS. Private
letter ruling requests require the payment of a nonrefundable user fee. For more information, see IRS Publication 590-A,
Contributions to Individual Retirement Arrangements (IRAs).

### If your payment includes employer stock that you do not roll over

If you do not do a rollover, you can apply a special rule to payments of employer stock (or other employer securities) that are either
attributable to after-tax contributions or paid in a lump sum after separation from service (or after age 591/2, disability, or the
participant's death). Under the special rule, the net unrealized appreciation on the stock will not be taxed when distributed from the
Plan and will be taxed at capital gain rates when you sell the stock. Net unrealized appreciation is generally the increase in the value
of employer stock after it was acquired by the Plan. If you do a rollover for a payment that includes employer stock (for example,
by selling the stock and rolling over the proceeds within 60 days of the payment), the special rule relating to the distributed employer
stock will not apply to any subsequent payments from the IRA or employer plan. The Plan administrator can tell you the amount
of any net unrealized appreciation.

### If you have an outstanding loan that is being offset

If you have an outstanding loan from the Plan, your Plan benefit may be offset by the outstanding amount of the loan, typically when
your employment ends. The offset amount is treated as a distribution to you at the time of the offset. Generally, you may roll over
all or any portion of the offset amount. Any offset amount that is not rolled over will be taxed (including the 10% additional income
tax on early distributions, unless an exception applies). You may roll over offset amounts to an IRA or an employer plan (if the terms
of the employer plan permit the plan to receive plan loan offset rollovers).

How long you have to complete the rollover depends on what kind of plan loan offset you have. If you have a qualified plan loan
offset, you will have until your tax return due date (including extensions) for the tax year during which the offset occurs to complete
your rollover. A qualified plan loan offset occurs when a plan loan in good standing is offset because your employer plan terminates,
or because you sever from employment. If your plan loan offset occurs for any other reason, then you have 60 days from the date
the offset occurs to complete your rollover.

### If you were born on or before January 1, 1936

If you were born on or before January 1, 1936 and receive a lump sum distribution that you do not roll over, special rules for
calculating the amount of the tax on the payment might apply to you. For more information, see IRS Publication 575, Pension and
Annuity Income.

### If your payment is from a governmental section 457(b) plan

If the Plan is a governmental section 457(b) plan, the same rules described elsewhere in this notice generally apply, allowing you
to roll over the payment to an IRA or an employer plan that accepts rollovers. One difference is that, if you do not do a rollover,
you will not have to pay the 10% additional income tax on early distributions from the Plan even if you are under age 591/2 (unless
the payment is from a separate account holding rollover contributions that were made to the Plan from a tax-qualified plan, a section
403(b) plan, or an IRA). However, if you do a rollover to an IRA or to an employer plan that is not a governmental section 457(b)
plan, a later distribution made before age 591/2 will be subject to the 10% additional income tax on early distributions (unless an
exception applies). Other differences include that you cannot do a rollover if the payment is due to an "unforeseeable emergency"
and the special rules under "If your payment includes employer stock that you do not roll over" and "If you were born on or before
January 1, 1936" do not apply.

### If you are an eligible retired public safety officer and your payment is used to pay for health coverage or qualified long- term care insurance

If the Plan is a governmental plan, you retired as a public safety officer, and your retirement was by reason of disability or was after
normal retirement age, you can exclude from your taxable income Plan payments paid directly as premiums to an accident or health
plan (or a qualified long-term care insurance contract) that your employer maintains for you, your spouse, or your dependents, up
to a maximum of $3,000 annually. For this purpose, a public safety officer is a law enforcement officer, firefighter, chaplain, or
member of a rescue squad or ambulance crew.

### If you roll over your payment to a Roth IRA

If you roll over a payment from the Plan to a Roth IRA, a special rule applies under which the amount of the payment rolled over

(reduced by any after-tax amounts) will be taxed. However, the 10% additional income tax on early distributions will not apply
(unless you take the amount rolled over out of the Roth IRA within 5 years, counting from January 1 of the year of the rollover).

If you roll over the payment to a Roth IRA, later payments from the Roth IRA that are qualified distributions will not be taxed
(including earnings after the rollover). A qualified distribution from a Roth IRA is a payment made after you are age 591/2 (or after
your death or disability, or as a qualified first-time homebuyer distribution of up to $10,000) and after you have had a Roth IRA for
at least 5 years. In applying this 5-year rule, you count from January 1 of the year for which your first contribution was made to a
Roth IRA. Payments from the Roth IRA that are not qualified distributions will be taxed to the extent of earnings after the rollover,
including the 10% additional income tax on early distributions (unless an exception applies). You do not have to take required
minimum distributions from a Roth IRA during your lifetime. For more information, see IRS Publication 590-A, Contributions to
Individual Retirement Arrangements (IRAs), and IRS Publication 590-B, Distributions from Individual Retirement Arrangements
(IRAs).

### If you do a rollover to a designated Roth account in the Plan

You cannot roll over a distribution to a designated Roth account in another employer's plan. However, you can roll the distribution
over into a designated Roth account in the distributing Plan. If you roll over a payment from the Plan to a designated Roth account
in the Plan, the amount of the payment rolled over (reduced by any after-tax amounts directly rolled over) will be taxed. However,
the 10% additional tax on early distributions will not apply (unless you take the amount rolled over out of the designated Roth
account within the 5-year period that begins on January 1 of the year of the rollover).

If you roll over the payment to a designated Roth account in the Plan, later payments from the designated Roth account that are
qualified distributions will not be taxed (including earnings after the rollover). A qualified distribution from a designated Roth
account is a payment made both after you are age 591/2 (or after your death or disability) and after you have had a designated Roth
account in the Plan for at least 5 years. In applying this 5-year rule, you count from January 1 of the year your first contribution was
made to the designated Roth account. However, if you made a direct rollover to a designated Roth account in the Plan from a
designated Roth account in a plan of another employer, the 5-year period begins on January 1 of the year you made the first
contribution to the designated Roth account in the Plan or, if earlier, to the designated Roth account in the plan of the other employer.
Payments from the designated Roth account that are not qualified distributions will be taxed to the extent of earnings after the
rollover, including the 10% additional income tax on early distributions (unless an exception applies).

### If you are not a Plan participant

Payments after death of the participant. If you receive a distribution after the participant's death that you do not roll over, the
distribution will generally be taxed in the same manner described elsewhere in this notice. However, the 10% additional income tax
on early distributions and the special rules for public safety officers do not apply, and the special rule described under the section
"If you were born on or before January 1, 1936" applies only if the participant was born on or before January 1, 1936.

If you are a surviving spouse. If you receive a payment from the Plan as the surviving spouse of a deceased participant, you
have the same rollover options that the participant would have had, as described elsewhere in this notice. In addition, if you
choose to do a rollover to an IRA, you may treat the IRA as your own or as an inherited IRA.

An IRA you treat as your own is treated like any other IRA of yours, so that payments made to you before you are age 591/2 will
be subject to the 10% additional income tax on early distributions (unless an exception applies) and required minimum
distributions from your IRA do not have to start until after you are age 701/2.

If you treat the IRA as an inherited IRA, payments from the IRA will not be subject to the 10% additional income tax on early
distributions. However, if the participant had started taking required minimum distributions, you will have to receive required
minimum distributions from the inherited IRA. If the participant had not started taking required minimum distributions from the
Plan, you will not have to start receiving required minimum distributions from the inherited IRA until the year the participant
would have been age 701/2.

If you are a surviving beneficiary other than a spouse. If you receive a payment from the Plan because of the participant's
death and you are a designated beneficiary other than a surviving spouse, the only rollover option you have is to do a direct
rollover to an inherited IRA. Payments from the inherited IRA will not be subject to the 10% additional income tax on early
distributions. You will have to receive required minimum distributions from the inherited IRA.

Payments under a qualified domestic relations order. If you are the spouse or former spouse of the participant who receives a
payment from the Plan under a qualified domestic relations order (QDRO), you generally have the same options and the same tax
treatment that the participant would have (for example, you may roll over the payment to your own IRA or an eligible employer plan
that will accept it). However, payments under the QDRO will not be subject to the 10% additional income tax on early distributions.

### If you are a nonresident alien

If you are a nonresident alien and you do not do a direct rollover to a U.S. IRA or U.S. employer plan, instead of withholding 20%,
the Plan is generally required to withhold 30% of the payment for federal income taxes. If the amount withheld exceeds the amount
of tax you owe (as may happen if you do a 60-day rollover), you may request an income tax refund by filing Form 1040NR and
attaching your Form 1042-S. See Form W-8BEN for claiming that you are entitled to a reduced rate of withholding under an income
tax treaty. For more information, see also IRS Publication 519, U.S. Tax Guide for Aliens, and IRS Publication 515, Withholding of
Tax on Nonresident Aliens and Foreign Entities.

### Other special rules

If a payment is one in a series of payments for less than 10 years, your choice whether to make a direct rollover will apply to all
later payments in the series (unless you make a different choice for later payments).

If your payments for the year are less than $200 (not including payments from a designated Roth account in the Plan), the Plan is
not required to allow you to do a direct rollover and is not required to withhold federal income taxes. However, you may do a 60-day
rollover.

Unless you elect otherwise, a mandatory cashout of more than $1,000 (not including payments from a designated Roth account in
the Plan) will be directly rolled over to an IRA chosen by the Plan administrator or the payor. A mandatory cashout is a payment
from a plan to a participant made before age 62 (or normal retirement age, if later) and without consent, where the participant's
benefit does not exceed $5,000 (not including any amounts held under the plan as a result of a prior rollover made to the plan).

You may have special rollover rights if you recently served in the U.S. Armed Forces. For more information on special rollover rights
related to the U.S. Armed Forces, see IRS Publication 3, Armed Forces' Tax Guide. You also may have special rollover rights if you
were affected by a federally declared disaster (or similar event), or if you received a distribution on account of a disaster. For more
information on special rollover rights related to disaster relief, see the IRS website at www.irs.gov.

## FOR MORE INFORMATION

You may wish to consult with the Plan administrator or payor, or a professional tax advisor, before taking a payment from the Plan.
Also, you can find more detailed information on the federal tax treatment of payments from employer plans in: IRS Publication 575,
Pension and Annuity Income; IRS Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs); IRS Publication
590-B, Distributions from Individual Retirement Arrangements (IRAs); and IRS Publication 571, Tax-Sheltered Annuity Plans
(403(b) Plans). These publications are available from a local IRS office, on the web at www.irs.gov, or by calling 1-800-TAX-
FORM.

For Payments From a
Designated Roth Account

## YOUR ROLLOVER OPTIONS

You are receiving this notice because all or a portion of a payment you are receiving from the [INSERT NAME OF PLAN] (the
"Plan") is eligible to be rolled over to a Roth IRA or designated Roth account in an employer plan. This notice is intended to help
you decide whether to do a rollover.

This notice describes the rollover rules that apply to payments from the Plan that are from a designated Roth account. If you also
receive a payment from the Plan that is not from a designated Roth account, you will be provided a different notice for that payment,
and the Plan administrator or the payor will tell you the amount that is being paid from each account.

Rules that apply to most payments from a designated Roth account are described in the "General Information About Rollovers"
section. Special rules that only apply in certain circumstances are described in the "Special Rules and Options" section.

## GENERAL INFORMATION ABOUT ROLLOVERS

### How can a rollover affect my taxes?

After-tax contributions included in a payment from a designated Roth account are not taxed, but earnings might be taxed. The tax
treatment of earnings included in the payment depends on whether the payment is a qualified distribution. If a payment is only part
of your designated Roth account, the payment will include an allocable portion of the earnings in your designated Roth account.

If the payment from the Plan is not a qualified distribution and you do not do a rollover to a Roth IRA or a designated Roth account
in an employer plan, you will be taxed on the earnings in the payment. If you are under age 591/2, a 10% additional income tax on
early distributions (generally, distributions made before age 591/2) will also apply to the earnings (unless an exception applies).

However, if you do a rollover, you will not have to pay taxes currently on the earnings and you will not have to pay taxes later on
payments that are qualified distributions.

If the payment from the Plan is a qualified distribution, you will not be taxed on any part of the payment even if you do not do a
rollover. If you do a rollover, you will not be taxed on the amount you roll over and any earnings on the amount you roll over will
not be taxed if paid later in a qualified distribution.

A qualified distribution from a designated Roth account in the Plan is a payment made after you are age 591/2 (or after your death
or disability) and after you have had a designated Roth account in the Plan for at least 5 years. In applying the 5-year rule, you count
from January 1 of the year your first contribution was made to the designated Roth account. However, if you did a direct rollover
to a designated Roth account in the Plan from a designated Roth account in another employer plan, your participation will count from
January 1 of the year your first contribution was made to the designated Roth account in the Plan or, if earlier, to the designated Roth
account in the other employer plan.

### What types of retirement accounts and plans may accept my rollover?

You may roll over the payment to either a Roth IRA (a Roth individual retirement account or Roth individual retirement annuity)
or a designated Roth account in an employer plan (a tax-qualified plan, section 403(b) plan, or governmental section 457 plan) that
will accept the rollover. The rules of the Roth IRA or employer plan that holds the rollover will determine your investment options,
fees, and rights to payment from the Roth IRA or employer plan (for example, no spousal consent rules apply to Roth IRAs and Roth
IRAs may not provide loans). Further, the amount rolled over will become subject to the tax rules that apply to the Roth IRA or the
designated Roth account in the employer plan. In general, these tax rules are similar to those described elsewhere in this notice, but
differences include:

· If you do a rollover to a Roth IRA, all of your Roth IRAs will be considered for purposes of determining whether you have satisfied
the 5-year rule (counting from January 1 of the year for which your first contribution was made to any of your Roth IRAs).

. If you do a rollover to a Roth IRA, you will not be required to take a distribution from the Roth IRA during your lifetime and you
must keep track of the aggregate amount of the after-tax contributions in all of your Roth IRAs (in order to determine your taxable
income for later Roth IRA payments that are not qualified distributions).

· Eligible rollover distributions from a Roth IRA can only be rolled over to another Roth IRA.

### How do I do a rollover?

There are two ways to do a rollover. You can either do a direct rollover or a 60-day rollover.

If you do a direct rollover, the Plan will make the payment directly to your Roth IRA or designated Roth account in an employer
plan. You should contact the Roth IRA sponsor or the administrator of the employer plan for information on how to do a direct
rollover.

If you do not do a direct rollover, you may still do a rollover by making a deposit (generally within 60 days) into a Roth IRA, whether
the payment is a qualified or nonqualified distribution. In addition, you can do a rollover by making a deposit within 60 days into
a designated Roth account in an employer plan if the payment is a nonqualified distribution and the rollover does not exceed the
amount of the earnings in the payment. You cannot do a 60-day rollover to an employer plan of any part of a qualified distribution.
If you receive a distribution that is a nonqualified distribution and you do not roll over an amount at least equal to the earnings
allocable to the distribution, you will be taxed on the amount of those earnings not rolled over, including the 10% additional income
tax on early distributions if you are under age 591/2 (unless an exception applies).

If you do a direct rollover of only a portion of the amount paid from the Plan and a portion is paid to you at the same time, the portion
directly rolled over consists first of earnings.

If you do not do a direct rollover and the payment is not a qualified distribution, the Plan is required to withhold 20% of the earnings
for federal income taxes (up to the amount of cash and property received other than employer stock). This means that, in order to
roll over the entire payment in a 60-day rollover to a Roth IRA, you must use other funds to make up for the 20% withheld.

### How much may I roll over?

If you wish to do a rollover, you may roll over all or part of the amount eligible for rollover. Any payment from the Plan is eligible
for rollover, except:

· Certain payments spread over a period of at least 10 years or over your life or life expectancy (or the lives or joint life expectancy
of you and your beneficiary);

· Required minimum distributions after age 701/2 (or after death);

· Hardship distributions;

· ESOP dividends;

· Corrective distributions of contributions that exceed tax law limitations;

· Loans treated as deemed distributions (for example, loans in default due to missed payments before your employment ends);

· Cost of life insurance paid by the Plan;

· Payments of certain automatic enrollment contributions requested to be withdrawn within 90 days of the first contribution; and

· Amounts treated as distributed because of a prohibited allocation of S corporation stock under an ESOP (also, there will generally
be adverse tax consequences if S corporation stock is held by an IRA).

The Plan administrator or the payor can tell you what portion of a payment is eligible for rollover.

### If I don't do a rollover, will I have to pay the 10% additional income tax on early distributions?

If a payment is not a qualified distribution and you are under age 591/2, you will have to pay the 10% additional income tax on early
distributions with respect to the earnings allocated to the payment that you do not roll over (including amounts withheld for income
tax), unless one of the exceptions listed below applies. This tax is in addition to the regular income tax on the earnings not rolled
over.

The 10% additional income tax does not apply to the following payments from the Plan:

· Payments made after you separate from service if you will be at least age 55 in the year of the separation;

· Payments from a governmental plan made after you separate from service if you are a qualified public safety employee and you will
be at least age 50 in the year of the separation;

· Payments made due to disability;

· Payments after your death;

· Payments of ESOP dividends;

· Corrective distributions of contributions that exceed tax law limitations;

· Cost of life insurance paid by the Plan;

· Payments made directly to the government to satisfy a federal tax levy;

· Payments made under a qualified domestic relations order (QDRO);

· Payments up to the amount of your deductible medical expenses (without regard to whether you itemize deductions for the taxable
year);

· Certain payments made while you are on active duty if you were a member of a reserve component called to duty after September
11, 2001 for more than 179 days;

· Payments of certain automatic enrollment contributions requested to be withdrawn within 90 days of the first contribution; and

· Payments for certain distributions relating to certain federally declared disasters.

### If I do a rollover to a Roth IRA, will the 10% additional income tax apply to early distributions from the IRA?

If you receive a payment from a Roth IRA when you are under age 591/2, you will have to pay the 10% additional income tax on
early distributions on the earnings paid from the Roth IRA, unless an exception applies or the payment is a qualified distribution.
In general, the exceptions to the 10% additional income tax for early distributions from a Roth IRA listed above are the same as the
exceptions for early distributions from a plan. However, there are a few differences for payments from a Roth IRA, including:

· The exception for payments made after you separate from service if you will be at least age 55 in the year of the separation (or age
50 for qualified public safety employees) does not apply.

· The exception for payments made at least annually in equal or close to equal amounts over a specified period applies without regard
to whether you have had a separation from service.

Will I owe State income taxes?

This notice does not describe any State or local income tax rules (including withholding rules).

# SPECIAL RULES AND OPTIONS

## If you miss the 60-day rollover deadline

Generally, the 60-day rollover deadline cannot be extended. However, the IRS has the limited authority to waive the deadline under
certain extraordinary circumstances, such as when external events prevented you from completing the rollover by the 60-day rollover
deadline. Under certain circumstances, you may claim eligibility for a waiver of the 60-day rollover deadline by making a written
self-certification. Otherwise, to apply for a waiver from the IRS, you must file a private letter ruling request with the IRS. Private
letter ruling requests require the payment of a nonrefundable user fee. For more information, see IRS Publication 590-A,
Contributions to Individual Retirement Arrangements (IRAs).

## If your payment includes employer stock that you do not roll over

If you receive a payment that is not a qualified distribution and you do not roll it over, you can apply a special rule to payments of
employer stock (or other employer securities) that are paid in a lump sum after separation from service (or after age 591/2, disability,
or the participant's death). Under the special rule, the net unrealized appreciation on the stock included in the earnings in the payment
will not be taxed when distributed to you from the Plan and will be taxed at capital gain rates when you sell the stock. If you do
a rollover to a Roth IRA for a nonqualified distribution that includes employer stock (for example, by selling the stock and rolling
over the proceeds within 60 days of the distribution), you will not have any taxable income and the special rule relating to the
distributed employer stock will not apply to any subsequent payments from the Roth IRA or employer plan. Net unrealized
appreciation is generally the increase in the value of the employer stock after it was acquired by the Plan. The Plan administrator
can tell you the amount of any net unrealized appreciation.

If you receive a payment that is a qualified distribution that includes employer stock and you do not roll it over, your basis in the
stock (used to determine gain or loss when you later sell the stock) will equal the fair market value of the stock at the time of the
payment from the Plan.

## If you have an outstanding loan that is being offset

If you have an outstanding loan from the Plan, your Plan benefit may be offset by the outstanding amount of the loan, typically when
your employment ends. The offset amount is treated as a distribution to you at the time of the offset. Generally, you may roll over
all or any portion of the offset amount. If the distribution attributable to the offset is not a qualified distribution and you do not roll
over the offset amount, you will be taxed on any earnings included in the distribution (including the 10% additional income tax on
early distributions, unless an exception applies). You may roll over the earnings included in the loan offset to a Roth IRA or
designated Roth account in an employer plan (if the terms of the employer plan permit the plan to receive plan loan offset rollovers).
You may also roll over the full amount of the offset to a Roth IRA.

## If you receive a nonqualified distribution and you were born on or before January 1, 1936

If you were born on or before January 1, 1936, and receive a lump sum distribution that is not a qualified distribution and that you
do not roll over, special rules for calculating the amount of the tax on the earnings in the payment might apply to you. For more
information, see IRS Publication 575, Pension and Annuity Income.

## If your payment is from a governmental section 457(b) plan

If the Plan is a governmental section 457(b) plan, the same rules described elsewhere in this notice generally apply, allowing you
to roll over the payment to an IRA or an employer plan that accepts rollovers. One difference is that, if you receive a payment that
is not a qualified distribution and you do not roll it over, you will not have to pay the 10% additional income tax on early distributions
with respect to the earnings allocated to the payment that you do not roll over, even if you are under age 591/2 (unless the payment
is from a separate account holding rollover contributions that were made to the Plan from a tax-qualified plan, a section 403(b) plan,
or an IRA). However, if you do a rollover to an IRA or to an employer plan that is not a governmental section 457(b) plan, a later
distribution that is not a qualified distribution made before age 591/2 will be subject to the 10% additional income tax on earnings
allocated to the payment (unless an exception applies). Other differences include that you cannot do a rollover if the payment is due
to an "unforeseeable emergency" and the special rules under "If your payment includes employer stock that you do not roll over"
and "If you were born on or before January 1, 1936" do not apply.

## If you receive a nonqualified distribution, are an eligible retired public safety officer, and your payment is used to pay for health coverage or qualified long-term care insurance

If the Plan is a governmental plan, you retired as a public safety officer, and your retirement was by reason of disability or was after
normal retirement age, you can exclude from your taxable income nonqualified distributions paid directly as premiums to an accident
or health plan (or a qualified long-term care insurance contract) that your employer maintains for you, your spouse, or your
dependents, up to a maximum of $3,000 annually. For this purpose, a public safety officer is a law enforcement officer, firefighter,
chaplain, or member of a rescue squad or ambulance crew.

## If you are not a Plan participant

Payments after death of the participant. If you receive a distribution after the participant's death that you do not roll over, the
distribution will generally be taxed in the same manner described elsewhere in this notice. However, whether the payment is a
qualified distribution generally depends on when the participant first made a contribution to the designated Roth account in the Plan.
Also, the 10% additional income tax on early distributions and the special rules for public safety officers do not apply, and the special
rule described under the section "If you receive a nonqualified distribution and you were born on or before January 1, 1936" applies
only if the participant was born on or before January 1, 1936.

If you are a surviving spouse. If you receive a payment from the Plan as the surviving spouse of a deceased participant, you
have the same rollover options that the participant would have had, as described elsewhere in this notice. In addition, if you
choose to do a rollover to a Roth IRA, you may treat the Roth IRA as your own or as an inherited Roth IRA.

A Roth IRA you treat as your own is treated like any other Roth IRA of yours, so that you will not have to receive any required
minimum distributions during your lifetime and earnings paid to you in a nonqualified distribution before you are age 591/2 will
be subject to the 10% additional income tax on early distributions (unless an exception applies).

If you treat the Roth IRA as an inherited Roth IRA, payments from the Roth IRA will not be subject to the 10% additional
income tax on early distributions. An inherited Roth IRA is subject to required minimum distributions. If the participant had
started taking required minimum distributions from the Plan, you will have to receive required minimum distributions from the
inherited Roth IRA. If the participant had not started taking required minimum distributions, you will not have to start receiving
required minimum distributions from the inherited Roth IRA until the year the participant would have been age 701/2.

If you are a surviving beneficiary other than a spouse. If you receive a payment from the Plan because of the participant's
death and you are a designated beneficiary other than a surviving spouse, the only rollover option you have is to do a direct
rollover to an inherited Roth IRA. Payments from the inherited Roth IRA, even if made in a nonqualified distribution, will not
be subject to the 10% additional income tax on early distributions. You will have to receive required minimum distributions from
the inherited Roth IRA.

Payments under a qualified domestic relations order. If you are the spouse or a former spouse of the participant who receives a
payment from the Plan under a qualified domestic relations order (QDRO), you generally have the same options and the same tax
treatment that the participant would have (for example, you may roll over the payment as described in this notice).

## If you are a nonresident alien

## Other special rules

If your payments for the year (only including payments from the designated Roth account in the Plan) are less than $200, the Plan
is not required to allow you to do a direct rollover and is not required to withhold federal income taxes. However, you can do a 60-day
rollover.

Unless you elect otherwise, a mandatory cashout from the designated Roth account in the Plan of more than $1,000 will be directly
rolled over to a Roth IRA chosen by the Plan administrator or the payor. A mandatory cashout is a payment from a plan to a

participant made before age 62 (or normal retirement age, if later) and without consent, where the participant's benefit does not
exceed $5,000 (not including any amounts held under the plan as a result of a prior rollover made to the plan).

# FOR MORE INFORMATION

# Appendix B

Some plan administrators that have been using the safe harbor explanations in Notice 2014-74 may wish to update those
explanations by making amendments to them (rather than by simply replacing them with the revised safe harbor explanations in
Appendix A). This appendix provides instructions on how to amend the safe harbor explanations in Notice 2014-74 to reflect the
modifications made in the revised safe harbor explanations in Appendix A. Part 1 contains amendments to the safe harbor explanation
for payments not from a designated Roth account and Part 2 contains amendments to the safe harbor explanation for payments from
a designated Roth account.

Part 1 - Amendments to the Safe Harbor Explanation for Payments not from a Designated Roth Account

1\. Under the heading "How can a rollover affect my taxes?," replace the second sentence with the following:

If you are under age 591/2 and do not do a rollover, you will also have to pay a 10% additional income tax on early distributions
(generally, distributions made before age 591/2), unless an exception applies.

2\. Replace the heading "Where may I roll over the payment?" with the following:

What types of retirement accounts and plans may accept my rollover?

3\. Under the heading "How do I do a rollover?," replace the second sentence of the third paragraph beginning "If you do not
do a direct rollover" with the following:

Generally, you will have 60 days after you receive the payment to make the deposit.

4\. Under the heading "How much may I roll over?," add semicolons at the end of the first 8 bullets, and the word "and" after
the semicolon in the eighth bullet.

5\. Under the heading "If I don't do a rollover, will I have to pay the 10% additional income tax on early distributions?,"
replace the second sentence of the first paragraph with the following:

This tax applies to the part of the distribution that you must include in income and is in addition to the regular income tax
on the payment not rolled over.

6\. Under the heading "If I don't do a rollover, will I have to pay the 10% additional income tax on early distributions?,"
replace the bullet list with the following:

· Payments made after you separate from service if you will be at least age 55 in the year of the separation;

· Payments that start after you separate from service if paid at least annually in equal or close to equal amounts over your life
or life expectancy (or the lives or joint life expectancy of you and your beneficiary);

· Payments from a governmental plan made after you separate from service if you are a qualified public safety employee and you
will be at least age 50 in the year of the separation;

· Payments made due to disability;

· Payments after your death;

· Payments of ESOP dividends;

· Corrective distributions of contributions that exceed tax law limitations;

· Cost of life insurance paid by the Plan;

· Payments made directly to the government to satisfy a federal tax levy;

· Payments made under a qualified domestic relations order (QDRO);

· Payments up to the amount of your deductible medical expenses (without regard to whether you itemize deductions for the taxable
year);

· Certain payments made while you are on active duty if you were a member of a reserve component called to duty after
September 11, 2001 for more than 179 days;

· Payments of certain automatic enrollment contributions requested to be withdrawn within 90 days of the first contribution;

· Payments for certain distributions relating to certain federally declared disasters; and

· Phased retirement payments made to federal employees.

7\. Under the heading "If I do a rollover to an IRA, will the 10% additional income tax apply to early distributions from
the IRA?," replace the first sentence of the first paragraph with the following:

8\. Under the heading "If I do a rollover to an IRA, will the 10% additional income tax apply to early distributions from
the IRA?," replace the first bullet with the following:

The exception for payments made after you separate from service if you will be at least age 55 in the year of the separation
(or age 50 for qualified public safety employees) does not apply.

9\. Under the heading, "If you miss the 60-day rollover deadline," replace the paragraph with the following:

Generally, the 60-day rollover deadline cannot be extended. However, the IRS has the limited authority to waive the deadline
under certain extraordinary circumstances, such as when external events prevented you from completing the rollover by the
60-day rollover deadline. Under certain circumstances, you may claim eligibility for a waiver of the 60-day rollover deadline
by making a written self-certification. Otherwise, to apply for a waiver from the IRS, you must file a private letter ruling
request with the IRS. Private letter ruling requests require the payment of a nonrefundable user fee. For more information,
see IRS Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs).

10\. Under the heading, "If you have an outstanding loan that is being offset," replace the paragraph with the following two
paragraphs:

If you have an outstanding loan from the Plan, your Plan benefit may be offset by the outstanding amount of the loan, typically
when your employment ends. The offset amount is treated as a distribution to you at the time of the offset. Generally, you
may roll over all or any portion of the offset amount. Any offset amount that is not rolled over will be taxed (including the
10% additional income tax on early distributions, unless an exception applies). You may roll over offset amounts to an IRA
or an employer plan (if the terms of the employer plan permit the plan to receive plan loan offset rollovers).

How long you have to complete the rollover depends on what kind of plan loan offset you have. If you have a qualified plan
loan offset, you will have until your tax return due date (including extensions) for the tax year during which the offset occurs
to complete your rollover. A qualified plan loan offset occurs when a plan loan in good standing is offset because your
employer plan terminates, or because you sever from employment. If your plan loan offset occurs for any other reason, then
you have 60 days from the date the offset occurs to complete your rollover.

11\. Under the heading "If your payment is from a governmental section 457(b) plan," replace the last sentence with the
following:

Other differences include that you cannot do a rollover if the payment is due to an "unforeseeable emergency" and the special
rules under "If your payment includes employer stock that you do not roll over" and "If you were born on or before January
1, 1936" do not apply.

12\. Replace the heading "If you are an eligible retired public safety officer and your pension payment is used to pay for
health coverage or qualified long-term care insurance" with the following:

If you are an eligible retired public safety officer and your payment is used to pay for health coverage or qualified
long-term care insurance.

13\. Under the heading "If you are an eligible retired public safety officer and your payment is used to pay for health
coverage or qualified long-term care insurance," replace the first sentence with the following:

accident or health plan (or a qualified long-term care insurance contract) that your employer maintains for you, your spouse,
or your dependents, up to a maximum of $3,000 annually.

14\. Replace the heading "If you are not a plan participant" with the following:

## If you are not a Plan participant

15\. Replace the paragraph under the heading "Payments under a qualified domestic relations order" with the following:

If you are the spouse or former spouse of the participant who receives a payment from the Plan under a qualified domestic
relations order (QDRO), you generally have the same options and the same tax treatment that the participant would have (for
example, you may roll over the payment to your own IRA or an eligible employer plan that will accept it). However,
payments under the QDRO will not be subject to the 10% additional income tax on early distributions.

16\. Under the heading "Other special rules," replace the first sentence of the second paragraph with the following:

If your payments for the year are less than $200 (not including payments from a designated Roth account in the Plan), the
Plan is not required to allow you to do a direct rollover and is not required to withhold federal income taxes.

17\. Under the heading "Other special rules," replace the fourth paragraph with the following:

You may have special rollover rights if you recently served in the U.S. Armed Forces. For more information on special
rollover rights related to the U.S. Armed Forces, see IRS Publication 3, Armed Forces' Tax Guide. You also may have special
rollover rights if you were affected by a federally declared disaster (or similar event), or if you received a distribution on
account of a disaster. For more information on special rollover rights related to disaster relief, see the IRS website at
www.irs.gov.

### Part 2 - Amendments to the Safe Harbor Explanation for Payments from a Designated Roth Account

1\. Under the heading "How can a rollover affect my taxes?," replace the second sentence of the second paragraph with the
following:

If you are under age 591/2, a 10% additional income tax on early distributions (generally, distributions made before age 591/2)
will also apply to the earnings (unless an exception applies).

2\. Replace the heading "Where may I roll over the payment?" with the following:

What types of retirement accounts and plans may accept my rollover?

3\. Under the heading "What types of retirement accounts and plans may accept my rollover?," replace the second parenthetical
in the first sentence with the following:

(a tax-qualified plan, section 403(b) plan, or governmental section 457 plan)

4\. Under the heading "How do I do a rollover?," replace the first sentence of the third paragraph beginning "If you do not do a
direct rollover" with the following:

If you do not do a direct rollover, you may still do a rollover by making a deposit (generally within 60 days) into a Roth IRA,
whether the payment is a qualified or nonqualified distribution.

5\. Under the heading "How much may I roll over?," add semicolons at the end of the first eight bullets, and the word "and" after
the semicolon in the eighth bullet.

6\. Under the heading "If I don't do a rollover, will I have to pay the 10% additional income tax on early distributions?,"
replace the bullet list with the following:

· Payments made after you separate from service if you will be at least age 55 in the year of the separation;

· Payments that start after you separate from service if paid at least annually in equal or close to equal amounts over your life or
life expectancy (or the lives or joint life expectancy of you and your beneficiary);

· Payments from a governmental plan made after you separate from service if you are a qualified public safety employee and you
will be at least age 50 in the year of the separation;

· Payments made due to disability;

· Payments after your death;

· Payments of ESOP dividends;

· Corrective distributions of contributions that exceed tax law limitations;

· Cost of life insurance paid by the Plan;

· Payments made directly to the government to satisfy a federal tax levy;

· Payments made under a qualified domestic relations order (QDRO);

· Payments up to the amount of your deductible medical expenses (without regard to whether you itemize deductions for the taxable
year);

· Certain payments made while you are on active duty if you were a member of a reserve component called to duty after September
11, 2001 for more than 179 days;

· Payments of certain automatic enrollment contributions requested to be withdrawn within 90 days of the first contribution; and

· Payments for certain distributions relating to certain federally declared disasters.

7\. Under the heading "If I do a rollover to a Roth IRA, will the 10% additional income tax apply to early distributions from
the IRA?," replace the first bullet with the following:

The exception for payments made after you separate from service if you will be at least age 55 in the year of the separation (or
age 50 for qualified public safety employees) does not apply.

8\. Under the heading "If you miss the 60-day rollover deadline," replace the paragraph with the following:

Generally, the 60-day rollover deadline cannot be extended. However, the IRS has the limited authority to waive the deadline
under certain extraordinary circumstances, such as when external events prevented you from completing the rollover by the
60-day rollover deadline. Under certain circumstances, you may claim eligibility for a waiver of the 60-day rollover deadline
by making a written self-certification. Otherwise, to apply for a waiver from the IRS, you must file a private letter ruling request
with the IRS. Private letter ruling requests require the payment of a nonrefundable user fee. For more information, see IRS
Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs).

9\. Under the heading "If you have an outstanding loan that is being offset," replace the paragraph with the following two
paragraphs:

If you have an outstanding loan from the Plan, your Plan benefit may be offset by the outstanding amount of the loan, typically
when your employment ends. The offset amount is treated as a distribution to you at the time of the offset. Generally, you may
roll over all or any portion of the offset amount. If the distribution attributable to the offset is not a qualified distribution and
you do not roll over the offset amount, you will be taxed on any earnings included in the distribution (including the 10%
additional income tax on early distributions, unless an exception applies). You may roll over the earnings included in the loan
offset to a Roth IRA or designated Roth account in an employer plan (if the terms of the employer plan permit the plan to receive
plan loan offset rollovers). You may also roll over the full amount of the offset to a Roth IRA.

How long you have to complete the rollover depends on what kind of plan loan offset you have. If you have a qualified plan
loan offset, you will have until your tax return due date (including extensions) for the tax year during which the offset occurs
to complete your rollover. A qualified plan loan offset occurs when a plan loan in good standing is offset because your employer
plan terminates, or because you sever from employment. If your plan loan offset occurs for any other reason, then you have 60
days from the date the offset occurs to complete your rollover.

10\. Before the heading "If you receive a nonqualified distribution, are an eligible retired public safety officer, and your pension payment
is used to pay for health coverage or qualified long-term care insurance," add the following new heading and paragraph:

If your payment is from a governmental section 457(b) plan

If the Plan is a governmental section 457(b) plan, the same rules described elsewhere in this notice generally apply, allowing you to
roll over the payment to an IRA or an employer plan that accepts rollovers. One difference is that, if you receive a payment that is
not a qualified distribution and you do not roll it over, you will not have to pay the 10% additional income tax on early distributions
with respect to the earnings allocated to the payment that you do not roll over, even if you are under age 591/2 (unless the payment
is from a separate account holding rollover contributions that were made to the Plan from a tax-qualified plan, a section 403(b) plan,
or an IRA). However, if you do a rollover to an IRA or to an employer plan that is not a governmental section 457(b) plan, a later
distribution that is not a qualified distribution made before age 591/2 will be subject to the 10% additional income tax on earnings
allocated to the payment (unless an exception applies). Other differences include that you cannot do a rollover if the payment is due
to an "unforeseeable emergency" and the special rules under "If your payment includes employer stock that you do not roll over" and
"If you were born on or before January 1, 1936" do not apply.

11\. Replace the heading "If you receive a nonqualified distribution, are an eligible retired public safety officer, and your
pension payment is used to pay for health coverage or qualified long-term care insurance" with the following:

If you receive a nonqualified distribution, are an eligible retired public safety officer, and your payment is used to pay
for health coverage or qualified long-term care insurance

12\. Replace the heading "If you are not a plan participant" with the following:

If you are not a Plan participant

13\. Replace the paragraph under the heading "Payments under a qualified domestic relations order" with the following:

14\. Under the heading "Other special rules," replace the first sentence of the second paragraph with the following:

If your payments for the year (only including payments from the designated Roth account in the Plan) are less than $200, the
Plan is not required to allow you to do a direct rollover and is not required to withhold federal income taxes.

15\. Under the heading "Other special rules," replace the fourth paragraph with the following:

You may have special rollover rights if you recently served in the U.S. Armed Forces. For more information on special rollover
rights related to the U.S. Armed Forces, see IRS Publication 3, Armed Forces' Tax Guide. You also may have special rollover
rights if you were affected by a federally declared disaster (or similar event), or if you received a distribution on account of a
disaster. For more information on special rollover rights related to disaster relief, see the IRS website at www.irs.gov.

# Definition of Terms

Revenue rulings and revenue procedures
(hereinafter referred to as "rulings") that
have an effect on previous rulings use the
following defined terms to describe the
effect:

Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).

Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.

Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.

Modified is used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A

and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified and clarified, above).

Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.

Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.

Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a pe-
riod of time in separate rulings. If the new
ruling does more than restate the sub-

stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.

Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.

Suspended is used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.

# Abbreviations

The following abbreviations in current
use and formerly used will appear in ma-
terial published in the Bulletin.

A-Individual.

Acq .- Acquiescence.

B-Individual.

BE-Beneficiary.

F.R .- Federal Register.

FUTA-Federal Unemployment Tax Act.

FX-Foreign corporation.

G.C.M .- Chief Counsel's Memorandum.

GE-Grantee.

GP-General Partner.

GR-Grantor.

COOP-Cooperative.

IC-Insurance Company.

Ct.D .- Court Decision.

I.R.B .- Internal Revenue Bulletin.

CY-County.

LE-Lessee.

D-Decedent.

LP-Limited Partner.

LR-Lessor.

M-Minor.

Nonacq .- Nonacquiescence.

O Organization.

P-Parent Corporation.

PHC-Personal Holding Company.

PO-Possession of the U.S.

PR-Partner.

PRS-Partnership.

PTE-Prohibited Transaction Exemption.
Pub. L .- Public Law.

REIT-Real Estate Investment Trust.

Rev. Proc .- Revenue Procedure.

Rev. Rul .- Revenue Ruling.

S-Subsidiary.

S.P.R .- Statement of Procedural Rules.

Stat .- Statutes at Large.

T-Target Corporation.

T.C .- Tax Court.

T.D .- Treasury Decision.

TFE-Transferee.

TFR-Transferor.

T.I.R .- Technical Information Release.

TP-Taxpayer.
TR-Trust.

TT-Trustee.

U.S.C .- United States Code.

DE-Donee.

Del. Order-Delegation Order.

DISC-Domestic International Sales Corporation.
DR-Donor.

E-Estate.

EE-Employee.

E.O .- Executive Order.

ER-Employer.

ERISA-Employee Retirement Income Security Act.
EX-Executor.

F-Fiduciary.

FC-Foreign Country.

FICA-Federal Insurance Contributions Act.

FISC-Foreign International Sales Company.

FPH-Foreign Personal Holding Company.

BK-Bank.

B.T.A .- Board of Tax Appeals.

C-Individual.

C.B .- Cumulative Bulletin.

CFR-Code of Federal Regulations.

CI-City.

DC-Dummy Corporation.

X-Corporation.

Y-Corporation.

Z-Corporation.

Numerical Finding List1

Treasury Decisions:

Bulletin 2018-27 through 2018-40

9834, 2018-31 I.R.B. 233 9835, 2018-33 I.R.B. 288

Announcements:

9836, 2018-33 I.R.B. 291 9838, 2018-34 I.R.B. 309

2018-09, 2018-28 I.R.B. 206

9839, 2018-35 I.R.B. 325

2018-12, 2018-30 I.R.B. 232

## Notices:

2018-48, 2018-28 I.R.B. 9
2018-56, 2018-27 I.R.B. 3
2018-58, 2018-33 I.R.B. 305
2018-59, 2018-28 I.R.B. 196
2018-60, 2018-31 I.R.B. 275
2018-61, 2018-31 I.R.B. 278
2018-62, 2018-34 I.R.B. 316
2018-63, 2018-34 I.R.B. 318
2018-64, 2018-35 I.R.B. 347
2018-65, 2018-35 I.R.B. 350
2018-67, 2018-36 I.R.B. 409
2018-68, 2018-36 I.R.B. 418
2018-69, 2018-37 I.R.B. 426
2018-70, 2018-38 I.R.B. 441
2018-72, 2018-40 I.R.B. 522
2018-73, 2018-40 I.R.B. 526
2018-74, 2018-40 I.R.B. 529

## Proposed Regulations:

REG-103474-18, 2018-32 I.R.B. 284
REG-106977-18, 2018-27 I.R.B. 6
REG-107892-18, 2018-35 I.R.B. 353

REG-112176-18, 2018-37 I.R.B. 430

## Revenue Procedures:

2018-35, 2018-28 I.R.B. 204
2018-36, 2018-38 I.R.B. 442
2018-37, 2018-29 I.R.B. 210
2018-38, 2018-31 I.R.B. 280
2018-39, 2018-34 I.R.B. 319
2018-40, 2018-34 I.R.B. 320
2018-42, 2018-36 I.R.B. 424
2018-43, 2018-36 I.R.B. 425
2018-44, 2018-37 I.R.B. 426
2018-45, 2018-37 I.R.B. 428
2018-46, 2018-39 I.R.B. 460
2018-47, 2018-39 I.R.B. 518
2018-48, 2018-40 I.R.B. 521

## Revenue Rulings:

2018-19, 2018-27 I.R.B. 1
2018-20, 2018-28 I.R.B. 8
2018-21, 2018-32 I.R.B. 282
2018-22, 2018-34 I.R.B. 308
2018-23, 2018-36 I.R.B. 405
2018-24, 2018-36 I.R.B. 407
2018-25, 2018-39 I.R.B. 445
2018-26, 2018-40 I.R.B. 520

1A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2018-01 through 2018-26 is in Internal Revenue Bulletin
2018-26, dated June 27, 2018.

## Finding List of Current Actions on Previously Published Items1

Bulletin 2018-27 through 2018-40

Notices:

2014-5
Modified by
Notice 2018-69, 2018-37 I.R.B. 426

2015-28
Modified by
Notice 2018-69, 2018-37 I.R.B. 426

2016-57
Modified by
Notice 2018-69, 2018-37 I.R.B. 426

2017-45
Modified by
Notice 2018-69, 2018-37 I.R.B. 426

### Revenue Procedures:

2015-27
Amplified by
Rev. Proc. 2018-39, 2018-34 I.R.B. 319

2017-24
Amplified by
Rev. Proc. 2018-39, 2018-34 I.R.B. 319

2018-31
Modified by
Rev. Proc. 2018-44, 2018-37 I.R.B. 426

"A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2018-01 through 2018-26 is in Internal Revenue Bulletin
2018-26, dated June 27, 2018.

# Internal Revenue Service Washington, DC 20224

Official Business
Penalty for Private Use, $300

# INTERNAL REVENUE BULLETIN

The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue
Bulletins are available at www.irs.gov/irb/.

# We Welcome Comments About the Internal Revenue Bulletin

If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we
would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page
(www.irs.gov) or write to the Internal Revenue Service, Publishing Division, IRB Publishing Program Desk, 1111 Constitution Ave.
NW, IR-6230 Washington, DC 20224.

Internal Revenue Bulletin 2018-40 (PDF rendition): IRS Notices

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