When employees leave an organization, they face an important decision about their retirement savings. Do they leave them in their former employer’s plan? Roll them into an IRA or into their new employer’s plan? Or cash out? The decision a participant makes can have a lasting impact on their retirement savings trajectory. Many participants, however, don’t fully understand their distribution options or the associated tax consequences. A 2024 Government Accountability Office (GAO) report found that more than half of participants surveyed didn’t know they could leave their savings in a former employer’s plan, and only 38% indicated they understood the tax implications of indirect rollovers. The IRS recently issued a guidance document aimed at helping sponsors shepherd participants through this process. IRS Notice 2026-13 provides safe harbor language sponsors can use to deliver certain written explanations to eligible participants about distribution options required under IRC Section 402(f). What Happens When a Participant Departs? When participants leave their jobs, they generally have four options for their 401(k) and other workplace defined contribution retirement plan account balances: Leave the assets in their former employer’s plan Roll them into a plan sponsored by their new employer Roll them into an IRA Cash out via a lump-sum distribution The first three options preserve the tax-advantaged status of retirement savings, allowing assets to continue growing under applicable tax rules. With the fourth option, however, participants may owe income taxes on the taxable portion of the distribution and may be subject to an additional 10% early distribution penalty if the participant is under age 59½. Among the first three options, the decision to keep assets in a former employer’s plan versus rolling them over can be a consequential financial choice, given potential differences in fees, investment options, and other characteristics of the former employer plan, the new employer plan, and an IRA. The Safe Harbor Guidance In the 2024 report, the GAO recommended that Section 402(f) notices provide clearer and more concise information about the four distribution options and their associated tax consequences. The report also included recommendations for the timing of these disclosures. In response, the IRS issued Notice 2026-13, which updates and clarifies the safe harbor explanations under Section 402(f). The revised guidance aims to help plan administrators meet the written notification requirement in light of recent statutory changes. The notice includes two separate safe harbor explanations: one for Roth accounts and one for non-Roth accounts. Both meet the requirements of Section 402(f) for an eligible rollover distribution if they’re provided to the recipient within a “reasonable period of time” (as defined in regulations) before the distribution is made. The guidance also addresses changes to the law, including updates related to: The 10% additional tax on early withdrawals from retirement plans Required minimum distribution rules for surviving spouses The increased age for determining dates for beginning required minimum distributions Next Steps for Plan Sponsors Sponsors can use the safe harbor language to meet Section 402(f) requirements when providing departed participants with an explanation of their distribution options. The language may be customized based on plan design, provided the modifications don’t affect the substantive requirements of the safe harbor explanation. For example, plans without after-tax employee contribution options may remove that portion of the language. The new safe harbors, however, may have a limited shelf life. The IRS is already anticipating updates to reflect future changes, including provisions of the SECURE 2.0 Act that become effective for taxable years beginning after December 31, 2026. Also, the updated explanations will not satisfy Section 402(f) to the extent the explanations are no longer accurate if there are changes in relevant law occurring after January 15, 2026. Increase your contributions as your earnings rise. Increase your contribution rate to reflect raises and bonuses, so your long-term savings potential keeps pace with your earnings. Reassess your savings rate as you pay down debt. As credit card balances, personal loans, student debt, or other monthly obligations decline, you may gain added flexibility to increase retirement plan contributions. Contribute enough to maximize your match. If you haven’t reviewed your elections in a while, you could be leaving part of an employer match on the table. Revisit beneficiary designations after major life events. If you experience changes in your marital status, dependents, or other personal circumstances, you may want to adjust your beneficiary elections. Take advantage of catch-up opportunities. For the 2026 tax year, participants aged 50 and older can contribute an additional $8,000 above the standard limit, with higher catch-up amounts — up to $11,250 — available for participants aged 60-63, subject to IRS limits and plan provisions. Retirement planning is a long game, and even small misalignments can compound over time and meaningfully affect your retirement readiness. Decisions made in the final years leading up to retirement can be especially important with less time to course correct. Periodic plan check-ins can go a long way toward keeping your savings strategy aligned with the realities of your life. Even if you’re using a target date fund or your plan’s automatic features, taking the time for quarterly or annual reviews can help you stay on track toward meeting your retirement goals. Sources: https://www.irs.gov/newsroom/treasury-irs-provide-new-safe-harbor-explanations-for-retirement-plan-administrators https://www.irs.gov/pub/irs-drop/n-26-13.pdf https://www.irs.gov/irb/2026-06_IRB https://www.gao.gov/products/gao-24-107167

The start of a new year is a natural time to set fresh financial resolutions, but unfortunately most don’t last past February. One reason may be that our money goals often don’t align with the way we naturally think or how we stay motivated once the initial enthusiasm fades. A study of more than 2,400 individuals published by American Psychologist found that people tend to save more successfully when their savings goals fit their personality — specifically their “Big Five” personality traits. Here’s how higher levels of these traits may influence everyday saving behavior… Openness: You’re creative, future-minded, and receptive to new experiences. Goals tied to inspiration, growth, or meaningful exploration may feel more motivating. If this sounds like you, saving for retirement abroad, travel, or a hobby you’ve always wanted to try may help you keep your saving plan on track. Conscientiousness: You like plans, order, and follow-through. Practical, clearly defined goals (e.g., methodically paying down a credit card balance or making extra mortgage payments) might appeal to your disciplined nature. Extraversion: You gain energy from people and social interactions. Goals connected to shared experiences or exciting future plans that involve others — such as organizing a family reunion, group travel, or saving to move to an active retirement community — may help keep you on course. Agreeableness: You’re driven by connection, cooperation, and concern for others. Financial goals that benefit loved ones or reflect shared values, such as creating a legacy trust for future generations or prioritizing charitable giving, may feel more purposeful and motivating. Neuroticism: While this word may feel like something you’d hear in a Woody Allen movie, neuroticism is simply a measure of sensitivity to stress and negative emotions. So, goals that ease worry and create a sense of security, calm, or safety — such as building a rainy-day fund or reducing debt — might be particularly effective for you. Saver, Know Thyself Even without taking a formal personality test, you can still consider which traits feel like a match and choose goals with those tendencies in mind to achieve what the researchers called “person-goal fit.” Ask yourself: “Am I drawn more to new experiences, regimented plans and checklists, energizing social interactions, supporting others, or easing financial anxiety?” Ultimately, your likelihood of sticking with a financial goal often depends on what it truly means to you. What motivates one person may barely register for someone else. When your savings goals fit your personality, you may be surprised at how much easier the follow-through becomes. Sources: https://www.apa.org/pubs/journals/releases/amp-amp0001128.pdf