Access Retirement Savings Penalty-Free After Disasters with SECURE 2.0 QDRDs
In light of recent natural disasters, we want to ensure you are aware of an important new provision under the SECURE 2.0 Act: Qualified Disaster Recovery Distributions (QDRDs).
As we have seen, natural disasters can strike anywhere. This optional provision is designed to help individuals affected by federally declared disasters access their retirement savings with favorable tax treatment.
QDRDs allow participants to withdraw up to $22,000 from their eligible accounts if they reside in an area impacted by a federally declared disaster. The benefits of these distributions include:
Penalty-free access: QDRDs are exempt from the standard 10% early withdrawal penalty for participants under age 59 1/2.
Flexible tax treatment: Taxes can be spread evenly over three years, reducing the immediate tax burden.
Repayment option: Participants have up to three years to repay the distribution, allowing them to replenish their retirement savings.
Plan sponsors would consider electing to make the QDRD provisions available to:
Support employees in times of disaster: If plans adopt the provision, employers provide a lifeline to employees facing financial hardships due to disasters.
Enhance plan attractiveness: Electing the QDRD provisions can make your retirement plan more appealing to both current and prospective team members.
Stay prepared: With the frequency of natural disasters increasing, by adopting the QDRD provisions, plan sponsors ensure the plan is set up to allow for the distributions if a crisis were to hit home.
The QDRD provision is optional, allowing you to decide when to implement it based on the specific circumstances for your plan.
Tony Powers, AIF®, CFP®, CRPS® Shareholder
Tony Powers, President of KerberRose Wealth Management, has more than 20 years of experience in the financial services industry. He specializes in helping private and public sector employers set-up and manage their employee retirement plans. Tony provides Fiduciary Services and Support, Plan Design Consultation, Plan Benchmarking and Financial Wellness.