Removing Barriers to Savings by Increasing Access
In an era of political division, retirement policy has quietly emerged as one of the few bipartisan success stories. Over the last two decades, Congress has repeatedly come together to strengthen the private retirement system, recognizing that while the framework works, there’s still room to improve.
Here at ERISA.com, we’ve been exploring the many impacts of SECURE 2.0, passed in December 2022. At over 350 pages, it’s a sweeping piece of legislation focused on three core goals: improving access to a workplace saving vehicle, increasing the amount actually saved, and simplifying administration. For many employees, the challenge isn’t whether they can join a plan, it’s whether they can afford to lock away funds they might need for unexpected expenses.
Saving for retirement is hard enough when you’re also managing day-to-day living costs. It gets even harder when that money becomes effectively untouchable after it’s contributed. That’s why many employees, especially lower earners, skip retirement savings altogether, choosing liquidity over long-term growth.
In fact, a recent study by Empower found that 37% of Americans couldn’t handle a $400 emergency expense. (Empower, July 2025)
To help solve that problem, SECURE 2.0 introduced several new ways to access retirement savings in emergencies without blowing up the long-term plan. In this post, we’ll break down three key provisions that aim to remove barriers, improve flexibility, and make it easier for Americans to build both short- and long-term financial security.
1. Withdrawals for Emergency Expenses
The first provision we will review creates a new way for employees to tap into their retirement savings when life throws a curveball.
Traditionally, access to retirement accounts has been tightly restricted. Employees typically can’t take distributions unless they’ve left the company, retired, or met certain hardship criteria. And even then, those hardship distributions often come with tax consequences, administrative friction, and if the participant is under age 59½, a 10% early withdrawal penalty. SECURE 2.0 changes that.
Plans can now allow Emergency Personal Expense Distributions: withdrawals of up to $1,000 per year to cover unexpected financial needs. These distributions are:
- Exempt from the 10% early withdrawal penalty
- Taxable, but relatively simple to administer
- Available only once per year, (potentially less frequently unless certain rules are followed)
Importantly, employees can self-certify that the distribution is for a qualifying emergency with no documentation or hardship vetting required.
Employees can also choose to repay the amount to the plan within three years, essentially restoring their savings and avoiding long-term leakage. In fact, if they don’t repay the $1,000, they can’t take another emergency distribution until:
- Three calendar years have passed, or
- They contribute at least as much back into the plan as they withdrew – either through repayments or participant deferrals
This provision offers plan participants a middle ground: a way to handle emergencies without undermining their long-term retirement savings. It’s a valuable tool to encourage participation among those who are hesitant to contribute because they are worried about locking up funds they might need in a pinch.
2. Domestic Abuse Victim Distributions
Another important but often overlooked provision of SECURE 2.0 is the new distribution option for individuals who’ve experienced domestic abuse.
The change allows eligible participants access to their retirement funds without facing the typical early withdrawal penalties, offering a lifeline during an extremely vulnerable time.
Here’s how it works:
Participants who self-certify that they’ve experienced domestic abuse within the prior 12 months can withdraw the lesser of:
- $10,000 (indexed for inflation), or
- 50% of their vested plan balance
These distributions are:
- Exempt from the 10% early withdrawal penalty
- Taxable, but eligible for repayment over three years, allowing individuals to restore their savings if circumstances stabilize
- Not limited to one-time use, unlike the emergency $1,000 withdrawal
Participants can claim this distribution treatment on their tax return even if the plan hasn’t formally adopted the provision so long as the withdrawal meets the IRS criteria.
3. Terminal Illness Distributions
The third early-access provision in SECURE 2.0 addresses serious illness.
SECURE 2.0 created a new distribution type for participants diagnosed as terminally ill. These withdrawals are also exempt from the usual 10% early withdrawal penalty.
Who Qualifies, and How
Participants must receive a formal certification from a licensed physician (MD or DO) stating that their condition is reasonably expected to result in death within 84 months (seven years). The certification must include:
- A narrative description of the medical evidence
- The physician’s name, contact info, exam date, and signature
- A signed attestation that the physician either examined the participant or reviewed documentation the participant provided
The participant must submit the certification to the plan administrator. No other medical records are required. Self-certification is not currently allowed, though a technical correction to SECURE 2.0 could change that.
Eligible plans include:
- 401(k), 403(b), and 401(a) plans
- 403(a) annuity plans
- Traditional and Roth IRAs
457(b) government plans are excluded.
Key Features
- Penalty-free treatment: No 10% early distribution tax for eligible participants under age 59½.
- No cap on distribution amount: Unlike the $1,000 emergency limit or $10,000 domestic abuse limit, there’s no dollar ceiling here.
- Recontribution permitted: Participants may recontribute all or part of the distribution within three years, as long as the plan accepts rollovers.
Importantly, if a plan does not offer terminally ill distributions, a participant can still treat an otherwise eligible withdrawal as though it was offered on their own tax return using IRS Form 5329.
A Note on Distributable Events
Here’s the legal wrinkle: as currently written, SECURE 2.0 does not classify TIIDs as distributable events for 401(k) or 403(b) plans. That means a participant must already be eligible for a withdrawal (due to hardship, separation from service, etc.) to access their balance under this provision.
This appears to be a drafting oversight, especially since other new distribution types like emergency expenses and domestic abuse distributions were granted that status. Lawmakers are considering a fix in an upcoming technical corrections bill that would give TIIDs full distributable event status.
Plan Sponsor Considerations
While offering TIIDs is optional, the decision comes with some administrative obligations:
- Certification collection and recordkeeping
- Revised IRS reporting procedures
- Plan amendment (due by Dec. 31, 2026 for changes made during the SECURE 2.0 remedial period)
One lingering question: Must a plan accept recontributions? While the IRS was silent on this point for TIIDs, its stance on Qualified Birth or Adoption Distributions (QBOADs), which follow a similar framework, suggests that if a participant is otherwise eligible to make a rollover contribution, the plan must accept it.
Sponsors wishing to avoid that may want to consult with legal counsel before implementing this provision operationally.
Wrapping It All Up
SECURE 2.0 has added a lot of complexity to the retirement landscape but also a lot of flexibility. The three distribution types we’ve covered: emergency expenses, domestic abuse, and terminal illness, represent a growing shift in how retirement plans can support real-life needs without compromising long-term goals.
Each provision is optional for plan sponsors and comes with its own administrative considerations, but together they reflect a powerful truth: employees are more likely to participate when they know they’ll have options if life takes a turn.
For advisors and employers, these tools open the door to more empathetic plan design. Whether it’s helping someone through an emergency, a crisis at home, or the unimaginable weight of a terminal diagnosis, plans that offer these features send a clear message: we’re not just planning for retirement, we’re planning for life.