SECURE Act 2.0 Expanded Access to Retirement Funds

Oct 27, 2023

The SECURE Act 2.0 has brought about many significant changes to the retirement plan landscape in recent months. Several of these changes affected the 2023 tax year, with more set to become effective January 1, 2024. Amongst the 2024 changes are several provisions aimed to expand access to retirement funds during emergencies. Previously the rules were more restrictive in this area regarding which distributions were exempt from the 10% early withdrawal penalty, and the circumstances surrounding when early distributions were permitted. This article will detail the specific changes made in this area.

Section 115 – Withdrawals for Certain Emergency Expenses

In general, early withdrawals from a retirement account are subject to a 10% penalty unless a known exception applies. SECURE Act 2.0 Section 115 provides an additional exception for “emergency expenses” which is defined as “unforeseen or immediate financial need relating to necessary personal or family medical expenses”. This definition is rather nebulous, and the regulations specify that the plan participant is responsible for self-certifying the qualifying event for which the distribution is needed. Additionally, bear in mind that a distribution would likely still count as taxable income to the recipient; this change only affects whether the distribution is subject to an early withdrawal penalty, not whether it can be excluded from income. Additional limitations on emergency withdrawals include:

  • Only one distribution for emergency medical purposes is allowed per year, and the maximum amount allowable is $1,000.
  • No additional emergency withdrawals can be taken for up to three years, unless one of the following conditions is met:
    • The prior distribution is fully repaid.
    • Employee deferrals or other contributions to the plan after the withdrawal was taken restore the amount distributed.

The changes put in place by SECURE Act 2.0 Section 115 become effective January 1, 2024.

Section 127 – Emergency Savings Accounts

SECURE Act 2.0 Section 127 introduces a new savings vehicle within an IRA or 401(k) plan, called a plan-linked emergency savings account (PLESA). A PLESA has few restrictions on a participant’s ability to withdraw funds, but there are several restrictions in place on these accounts, detailed as follows:

  • Only employee contributions are permitted to the account, no employer match is allowed. Any employer match on these contributions is not held within the PLESA, they are transferred over to the participant’s non-PLESA match account.
  • Contributions are all made after-tax, effectively rendering the PLESA a Roth account. The benefit of this treatment to the participant is tax-free distributions from the PLESA, but because of the Roth feature, initial contributions reduce participant’s take-home salary.
  • The maximum balance allowed in a PLESA is the lesser of $2,500 or the amount determined by the employer. Any excess contributions can be transferred to a separate Roth account for the participant, and that extra account would be subject to all the normal Roth account distribution rules.

PLESA distributions must be permitted at least once per month, and no charges or fees can be imposed on the first four withdrawals annually. The withdrawn funds from a PLESA can be used for any purpose, unlike the restrictions described in the previous section regarding emergency medical expenses.

These changes become effective beginning January 1, 2024.

Section 314 – Penalty-Free Withdrawals for Victims of Domestic Abuse

Section 314 of the SECURE Act 2.0 allows participants who have been victims of domestic abuse to receive a distribution from their 401(k), 403(b), or 457(b) plan. The amount allowed to be taken is the lesser of $10,000 or 50% of the participant’s vested account balance. The annual maximum distribution will be indexed for inflation, thereby increasing over time. The distribution would not be subject to the 10% early withdrawal penalty, but it would still be counted as taxable income to the recipient.

To be eligible for exemption from the 10% early withdrawal penalty, the distribution must be taken within 12 months of the domestic abuse incident. Plans adopting this provision can allow the participants to self-certify the occurrence of domestic abuse to take advantage of these provisions.

These new provisions become effective January 1, 2024.

Section 331 – Natural Disaster Retirement Plan Withdrawals

When dealing with natural disasters, Congress has historically only granted temporary relief for retirement plan distributions on a case-by-case basis. Section 331 of the SECURE Act 2.0 establishes a permanent rule governing retirement plan distributions and loans in areas affected by Federally declared natural disasters. These changes affect qualified 401(k), 403(b), and 457(b) plans. The provisions affecting distributions are as follows:

  • Affected individuals may receive distributions up to $22,000 per disaster. The distribution is exempt from the 10% early withdrawal penalty.
  • The distribution will still be counted as taxable income, but the tax due can be spread over a three-year period.
  • Any amounts recontributed to the plan during the 3-year period starting the date after the distribution can reduce the tax due.
  • Distributions taken with the intention to purchase a principal residence located in the disaster area may be recontributed to the plan if the purchase was not made, and the amount repaid will not be counted as income to the recipient.

The following provisions affect loans taken because of natural disasters:

  • The maximum allowable loan amount has been increased to the lesser of $100,000 or 100% of the individual’s vested account balance for individuals experiencing a natural disaster.
  • The loan repayment term is extended one additional year for loans made pursuant to disaster relief.

These changes are effective beginning January 1, 2024.


The SECURE Act 2.0 has introduced many significant changes to different areas of tax law. The majority of the changes affect retirement plans to some degree, or introduce new aspects to those plans, such as the changes outlined above. Please consult your tax advisor to discuss these changes and how they could impact you.

About the author

Matt McKinney is a Tax Manager in DHW’s Hickory office. Matt has been with the firm over 10 years and assists individuals and business owners with navigating the complex and ever-changing tax landscape. Matt can be contacted at 828-322-2070 or via email at