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Participant Distributions: Navigating SECURE 2.0 Changes

Participant Distributions: Navigating SECURE 2.0 Changes

August 28, 2023

In the ever-evolving landscape of retirement planning, staying informed about regulations is crucial. The SECURE 2.0 Act brings significant changes to participant distribution rules, impacting various aspects of retirement accounts. Below, we will explore these changes and their implications for individuals preparing for their retirement journey.

RMD Starting Age Evolution (Section 107)

The SECURE 2.0 Act introduces an upward shift in the RMD starting age. Previously set at 72, individuals can now breathe a bit easier as the age rises to 73, effective from January 1, 2023. Individuals who attain age 72 after 12/31/22, and age 73 before 1/1/30, the applicable RMD age is now 73. Even more liberating, the age threshold makes another leap to 75, starting January 1, 2033. Individuals who attain age 73 after 12/31/29, and age 74 before 1/1/33, their applicable RMD age is 75. This means an extended period for your investments to grow before mandatory distributions kick in. 

Small Balance Transfers (Section 304)

Under current regulations, transferring 401(k) accounts of former employees to IRAs is possible if their balance doesn't exceed $5,000. SECURE 2.0 enhances this limit to $7,000, allowing a larger number of individuals to consolidate their retirement accounts effectively. This enhancement, effective for distributions post-December 31, 2023, streamlines retirement planning.

Easing Hardship Withdrawals (Section 312)

The SECURE 2.0 Act introduces a self-certification option for hardship withdrawals. Under certain circumstances, employees can attest to experiencing a qualifying event, simplifying the process for taking hardship withdrawals. This change, effective for plan years starting after December 29, 2022, aims to make accessing funds during tough times more straightforward.

Disaster Relief and Retirement Funds (Section 331)

In the aftermath of federally declared disasters, the SECURE 2.0 Act provides permanent rules for utilizing retirement funds. Individuals affected by disasters occurring on or after January 26, 2021, can access up to $22,000 from their 401(k) plans, offering a financial lifeline when it's needed most.

Emergency Distributions (Section 115)

Emergencies strike without warning, and finances can feel the strain. The SECURE 2.0 Act recognizes this by offering exceptions to the additional 10% tax on early 401(k) distributions. If used for unforeseeable or immediate personal or family emergency expenses, these distributions are exempt from the penalty. Only 1 emergency distribution per year is allowed up to $1,000. The distribution
may be repaid to the plan within 3 years and a second distribution may be limited if repayment has not been made. This provision comes into play for distributions made post-December 31, 2023.

Expanded Penalty-Free Early Distributions (Section 314 and Section 326)

SECURE 2.0 introduces several exceptions to the 10% additional tax on early distributions. Notably, Section 314 offers penalty-free distributions to domestic abuse victims. Victims of domestic violence may withdraw up to the lesser of $10,000 or 50% of account balance. Distributions taken may be repaid over 3 years. This change, effective for distributions from December 31, 2023, provides a lifeline to those seeking to break free from abusive situations.

Additionally, Section 326 provides an exception to the 10% early distribution penalty for those with a terminal illness and was effective for distributions occurring after December 29, 2022.


Navigating retirement regulations can be as complex as charting a new course. The SECURE 2.0 Act brings forth transformative changes to retirement plan distribution rules, ensuring flexibility, compassion, and empowerment for individuals in their retirement journey. Stay informed, adapt, and plan wisely to make the most of your retirement plan.


Plan sponsors should consult with their plan providers to identify the necessary plan amendments for their individual retirement plan, as well as establish a timeline for their implementation.