Tax Planning
Qualified Long-Term Care Distributions under SECURE 2.0: What Retirement Savers Need to Know
Notice 2026-33 provides guidance on how defined-contribution plans can permit distributions for long-term care premiums, and more importantly, offers **safe harbors and reporting rules** starting after Dec 29, 2025.
By NomadicTax Research Team • 5-8 min read • July 1, 2026
## What Counts as a Qualified Long-Term Care Distribution
- Under **Section 334 of the SECURE 2.0 Act**, DC plans may offer distributions for long-term care insurance premiums or services, for distributions made **after December 29, 2025**. These are called **qualified long-term care distributions**. From tax year 2026, this is fully in effect. ([irs.gov](https://www.irs.gov/irb/2026-24_IRB?utm_source=openai))
- These distributions are **not subject to the 10% early withdrawal (additional tax)** under section 72(t)(2)(N) of the Code. However, income tax still applies where relevant. ([irs.gov](https://www.irs.gov/irb/2026-24_IRB?utm_source=openai))
## What the Guidance Requires of Issuers and Plan Administrators
- Issuers of long-term care insurance must file an **Issuer Disclosure** with the IRS before participants can use the scheme. The disclosure must include issuer info, type of coverage, state regulatory approval, and other required elements. ([irs.gov](https://www.irs.gov/pub/irs-drop/n-26-33.pdf?utm_source=openai))
- Plans must permit **plan participants** to request a **long-term care premium statement** once the issuer has filed that disclosure. Those statements are used to make qualified distributions. ([irs.gov](https://www.irs.gov/pub/irs-drop/n-26-33.pdf?utm_source=openai))
- Plan amendments: Defined-contribution plan sponsors (non-governmental, not public school Section 403(b), etc.) must amend plans to allow this distribution option if not already included. The date for amendments is extended under the guidance. ([irs.gov](https://www.irs.gov/pub/irs-drop/n-26-33.pdf?utm_source=openai))
## Practical Scenarios
- **Scenario A**: Jane has a 401(k) plan through her employer. Her long-term care insurance qualifies, and the insurer has filed the required Issuer Disclosure. Jane gets the premium statement, and uses distribution from her plan to pay her LTC contract premiums—without the 10% penalty. Income tax still applies.
- **Scenario B**: Bob’s employer has yet to amend the plan. Bob’s insurer hasn’t filed the Disclosure. Bob cannot yet use plan funds without risking non-compliance; thus, plan sponsor must act.
## Implications & Tips
- If you are a plan sponsor, **check deadlines** for plan amendments—this guidance gives more time, but action is required to permit distributions.
- If you are an issuer: file the Issuer Disclosure proactively so participants are not blocked.
- Tax planning: For savers likely to need long-term care coverage, distributions can help with cash flow—but timing matters. Use 2026 remainder if eligible.
## What’s Not Changing or What To Watch Out For
- Distributions still included in gross income, unless exclusions apply; no tax on the distribution is only regarding **additional penalty**.
- Only **qualified long-term care insurance** (as defined under IRC 7702B) or certified LTC coverage qualifies. Not all LTC contracts will meet test.
- Plan sponsors must follow reporting and disclosure; failure could lead to penalties or rejected claims.
This change gives real tax benefit to retirement savers planning for long-term care. Structuring eligibility is complex—review your LTC coverage, insurer activity, and plan document carefully.