What type of notice must be sent to a participant at normal retirement age explaining taxation rules before a distribution?

A notice explaining taxation rules is essential at the time of distribution for participants reaching normal retirement age. This type of notice provides critical information about how distributions from a 401(k) plan will be taxed, including details on federal income tax withholding and potential penalties for early withdrawals.

Understanding these taxation rules is crucial for participants, as it affects their financial planning and decision-making regarding withdrawals. Providing this information ensures compliance with IRS regulations and helps participants avoid unintended tax consequences.

Other options, such as the 1099-R tax form, are used to report distributions and the amount of taxes withheld for that tax year but are provided after the distribution has occurred. An annual plan summary may include general information about the plan but does not specifically address the taxation rules that pertain to distributions. A retirement account overview may provide broad insights into the account but lacks the focused details regarding taxation required at the time of distribution.