SECURE Act 2.0: Changes Affecting the Terminally Ill, Victims of Domestic Abuse, and the Disabled.

Several provisions contained in SECURE 2.0 will benefit the terminally ill, victims of domestic abuse and the disabled.

SECURE 2.0 creates a new exception to the 10% early withdrawal penalty for individuals who are terminally ill. To qualify for this exception, an individual is deemed to be “terminally ill” if the individual has been certified by a physician as having an illness or physical condition which can reasonably be expected to result in death within 84 month or less. An individual who takes a distribution from an IRA under the “terminally ill” exception may repay the distribution with 3 years.

With respect to an individual who is the victim of domestic abuse, SECURE 2.0 permits the victim of DA to withdraw the lesser of 50% of their vested balance in the retirement account or $10,000 (indexed for inflation) without incurring the 10% early withdrawal penalty. Any such distribution must be taken by the individual within 1-year after becoming the victim of abuse. “Abuse” is broadly defined to include physical, psychological, sexual, emotional, or economic abuse, including efforts to control, isolate, humiliate, or intimidate the victim, or to undermine the victim’ ability to reason independently, including by means of abuse of the victim’ child or another family member living in the household. All or a portion of a distribution may be repaid to the account within 3 years of the distribution.

Finally, SECURE 2.0 expands access to ABLE accounts to individuals who become disabled before age 46.

ABLE accounts are tax-advantaged savings accounts for individuals with disabilities. They allow the disabled to accumulate a small amount of savings without jeopardizing eligibility for means tested benefits such as Medicaid. Income earned by the account is not taxable. Under existing law, a disabled individual of any age may establish an ABLE (a/k/a 529A) account if the disability manifested itself before age 26.

Beginning in 2026, a disabled individual may establish an ABLE account at any age as long as the disability arose before age 46. (The individual does not have to establish the ABLE account before age 46.)

This seems trivial, but many disabilities do not manifest themselves until later in life, well beyond age 26. This change will expand access to ABLE accounts and their benefits to many more individuals (why the wait until 2026 puzzles me).

Do you have a question regarding the impact SECURE Act 2.0 may have on your situation? Send us a note, we can help.