SECURE Birth or Adoption Distribution

[Gruegen]

Assuming that the plan sponsor has authorized SECURE Act qualified birth or adoption distributions under the plan, may a terminated employee who maintains an account balance in a plan receive a qualified birth or adoption distribution? I think Yes - - I could not find anything in the statutory text (or the Joint Committee on Taxation Report) that limits qualified birth or adoption distributions to active employees. But wanted to see if others read feel different.

[RatherBeGolfing]

Nothing in SECURE would limit it to active employees.  It all depends on how the document has been amended to allow for this provision. 

[rocknrolls2]

Unless someone is coming up on the one-year deadline for taking one, I would hold off on allowing them or processing such distributions until the IRS issues at least preliminary guidance on this. One While I agree that SECURE does not specifically limit such distributions to active employees, you might want to consider the employee's ability to roll the distribution back to the plan after taking such distribution (how long the participant has to make such roll-back is still not clear and it would be worth waiting for more clarity from IRS guidance (although I suspect that this will be limited to the 3-year period after taking the distribution)). Effectively the roll-back provision seems to generally be limited to the qualified plan in which the individual is an active participant. Even if IRS guidance were to allow a roll-back by an inactive participant, most employers would be reluctant to accept rollovers from former employees.

[RatherBeGolfing]

10 minutes ago, rocknrolls2 said:

(although I suspect that this will be limited to the 3-year period after taking the distribution)

I haven't heard anything that points to a 3 year limit, just that it can go back as pre-tax in the year of distribution or after-tax for subsequent years.

[BTG]

Agree that there is nothing in SECURE that limits this to active participants (though they will be the one ones eligible to pay it back).  Also agree with RatherBeGolfing...  Everything I've seen on this, including some discussions with IRS/Treasury, has been pretty clear that there is no time limit on repayment.  The individual just has to remain otherwise eligible to contribute.  I should also mention that they have been clear that you don't have to allow the distributions, but if you do allow them, you have to allow for repayment.