I Need It Now! Taking a Look at IRS Guidance on Emergency Personal Expense Distributions

The SECURE 2.0 Act added an exception to the 10% early distribution penalty tax under I.R.C. § 72(t) for "emergency personal expense distributions" from a defined contribution plan. The exception, discussed under I.R.S. Notice 2024-55, recognizes that 401(k)/403(b)/457(b) savings may be the primary savings a participant has and sometimes participants need money fast. The recent IRS notice keeps the 10% penalty tax from applying to these distributions, which are limited to $1,000 and once-a-year.

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