To better assist domestic abuse survivors, retirement plan administrators may consider amending their plan for 2024. Section 314 of the SECURE 2.0 Act beginning in 2024 allows a participant who is a survivor of domestic violence to receive a penalty free distribution from their retirement account (401(k), 403(b), and 457(b) plans).
Employers are often at a loss on how to best support domestic abuse survivors at work; however, 21% of full-time employees have experienced domestic abuse, which has serious implications for employee safety, productivity, and morale. Secure 2.0 offers employers another option to support survivors.
Qualifications:
- The domestic abuse survivor is allowed to self-certify, which does not require any further documentation (e.g. no records from law enforcement or medical facilities are required to obtain the withdrawal).
- Domestic abuse is defined as physical, psychological, emotional or economic abuse, as well as efforts aimed at controlling, isolating, humiliating, or intimidating the employee or undermining the employee’s ability to reason independently , including by means of abuse of the survivor’s child or another family member living in the household.
- The distribution must be taken within 12 months of the domestic abuse incident.
Withdrawal Allowance:
- Beginning in 2024, plan administrators may choose to allow plan participants to withdraw funds in instances of domestic abuse by a spouse or domestic partner.
- Section 314 would allow the survivor to take, in the aggregate, the lesser of $10,000 (indexed for inflation) or 50% of their vested account balance.
- The distribution is subject to income tax but would not be subject to the 10% early distribution penalty that is typically applied to distributions taken prior to retirement age.
- The eligible distribution must be taken within 12 months of the domestic abuse incident.
Repayment:
- The survivor could re-pay the amount taken over the following 3-year period.
- If the amount is repaid within the 3-year period, the income tax will be refunded on the repaid money.
Employer Next Steps:
- If the employer chooses to include this provision for 2024, they should work closely with their retirement plan administrator to work through updating the plan document and building appropriate processes for the withdrawal.
If you are interested in learning how we can assist you in learning more about Secure 2.0, contact the ComplianceDashboard team today!
[1] https://www.shrm.org/resourcesandtools/hr-topics/risk-management/pages/domestic-violence-workplace-nfl-ray-rice.aspx