Exception to penalty on early distribution for individuals with a terminal illness Creates a new 10% early distribution penalty exception for individuals who are terminally ill. For purposes of this exception, the individual is deemed to be “terminally ill” if they have “been certified by a physician as having an illness or physical condition which… Continue reading
Exception to 10% early distribution penalty and expanded access to plan loans for plan participants in disaster areas Allows up to $22,000 to be distributed from employer retirement plans or IRAs for affected individuals. Such distributions, called “Qualified Disaster Recovery Distributions,” are not subject to the 10% early distribution penalty, and the individual may include… Continue reading
Optional treatment of employer matching or non-elective contributions as Roth contributions Due to a provision within SECURE 2.0, participants in account-based plans, including governmental 457(b) plans are now allowed to designate employer-matching contributions as Roth contributions, and plans to deposit matching and/or non-elective contributions to employees’ designated Roth accounts as Roth contributions. Such amounts will… Continue reading
Modification of required minimum distribution rules for special needs trusts SECURE 2.0 places limits on the ability of beneficiaries of defined contribution retirement plans and IRAs to receive lifetime distributions after the account owner’s death. Special rules apply in the case of certain beneficiaries, such as those with a disability. In the case of a… Continue reading
Employer may rely on participant certifying that deemed hardship/ unforeseeable emergency distribution conditions are met This change provides that, under certain circumstances, participants are permitted to self-certify that they had an event that constitutes an unforeseeable emergency for purposes of an unforeseeable emergency distribution from the 457(b) plan. Plans are permitted to rely on the… Continue reading
Repayment of Qualified Birth or Adoption Distribution SECURE 2.0 includes a provision that allows individuals to receive distributions from their retirement plan in the case of birth or adoption without paying the 10% additional tax. Distributions can be repaid to a retirement plan or IRA and are treated as timely rollovers. SECURE 2.0 now restricts… Continue reading
Public Safety Officer Health Insurance Previous law provided the opportunity for public safety officers to exclude $3,000 from gross income for a direct payment for health insurance premiums from a governmental retirement plan. With SECURE 2.0, insurance premium payments no longer need to be paid directly from the retirement plan to qualify for the tax… Continue reading
Reduction in excise tax on RMDs Reduces the penalty for failure to take an RMD from 50% to 25%. Further, if a failure to take an RMD from an IRA is corrected in a timely manner, as defined under SECURE 2.0, the excise tax on the failure is further reduced from 25% to 10%. This… Continue reading
Elimination of the “first day of the month” requirement for elections to defer compensation from governmental 457(b) plans Under current law, participants in a governmental 457(b) plan must request changes to their deferral rate prior to the beginning of the month in which the deferral will be made. This rule does not exist for other… Continue reading
Required minimum distribution (RMD) age changes Increases the required minimum distribution (RMD) age from 72 to 73 for individuals who attain age 72 after January 1, 2023, and age 73 before January 1, 2033. Further, there is a subsequent increase to age 75 for any individual who did not attain age 74 prior to January… Continue reading