IRS issues new guidance on emergency distributions from retirement plans

Taxpayers can get a distribution from an applicable eligible retirement plan for personal or family emergency expenses, according to new guidance.

Notice 2024-55 provides guidance on exceptions to additional tax when taking early permissible retirement plan distributions for emergency personal expenses and for victims of domestic abuse. This was added by SECURE 2.0 and became effective this year.

The notice contains several details about these exemptions, including:

• Defining emergency personal expense distributions, including what constitutes “an unforeseeable or immediate” financial need; 
• Providing that qualified defined contribution plans or IRAs are eligible to permit emergency personal expense distributions; 
• Describing limitations on receiving emergency personal expense distributions; and, 
• Providing that individuals receiving emergency personal expense distributions are permitted to repay these distributions to certain plans. 

A taxpayer can receive a distribution from an applicable eligible retirement plan if it is made during the one-year period beginning on the date on which the individual is a victim of domestic abuse by a spouse or domestic partner. The notice:

• Defines domestic abuse victim distributions, including the definition of domestic abuse; 
• Provides that IRAs and certain retirement plans not subject to spousal consent requirements are eligible to permit domestic abuse victim distributions; 
• Describes the dollar limitation on victim distributions; and, 
• Provides that domestic abuse individuals are permitted to repay victim distributions to certain plans.

The Department of the Treasury and the IRS anticipate issuing regulations on the 10% additional tax (including the exceptions to the additional tax) and request comments relating to the notice, specifically on repayments of certain distributions permitted under Sec. 72(t)(2).