The Age 50 Exception and the Still-Working Exception: Today's Slott Report Mailbag
By Andy Ives, CFP®, AIF®
Follow Us on X: @theslottreport
Hello! I recently came across one of your articles and decided to reach out to you in hopes of getting some clarification re: the Secure Act 2.0 and distributions as a qualified public safety employee. In a nutshell, I am a 17-year career firefighter for a county government. With the new Secure Act 2.0, it seems as though I can take distributions after 25 years of service, OR age 50, whichever comes first, without penalty. If this is true, would I be eligible to begin taking distributions at age 47, without penalty? However, I am NOT eligible to retire from my county service until I reach age 55. So, if I separate from service (aka resign) at age 47, with 25 years of service, what would I need to do with my 401(k) in order to be able to begin taking penalty-free distributions? Any help is appreciated.
You are correct that an age 50 exception to the 10% early distribution penalty exists for certain public safety employees, including firefighters. SECURE 2.0 extended the age 50 public safety exception to private sector firefighters and corrections officers who are employees of state and local governments. SECURE 2.0 also modified the exception to apply upon the lesser of age 50 or 25 years of service. If you resign at age 47 and have 25 years of service, there is nothing special you need to do with your 401(k). You can take distributions from the plan, and they will be exempt from the 10% early withdrawal penalty. (Also, do not roll your plan to an IRA if you want to continue to use the age 50 exception. The rule only applies to distributions taken from the plan.)
If a plan participant is 75 and still working, but they decide to rollover funds mid-year to an IRA for an in-service rollover, does the RMD apply for those funds?
If the work plan includes the still-working exception (not all do), and if that employee works through the end of the calendar year, then no RMD applies in that same year. As such, no RMD need be taken prior to the rollover. If, however, the person separates from service at any time during the year of the rollover, the RMD will apply and must be taken prior to the rollover.
Content Citation Guidelines
Below is the required verbiage that must be added to any re-branded piece from Ed Slott and Company, LLC or IRA Help, LLC. The verbiage must be used any time you take text from a piece and put it onto your own letterhead, within your newsletter, on your website, etc. Verbiage varies based on where you’re taking the content from.
Please be advised that prior to distributing re-branded content, you must send a proof to [email protected] for approval.
For white papers/other outflow pieces:
Copyright © [year of publication], [Ed Slott and Company, LLC or IRA Help, LLC - depending on what it says on the original piece] Reprinted with permission [Ed Slott and Company, LLC or IRA Help, LLC - depending on what it says on the original piece] takes no responsibility for the current accuracy of this information.
Copyright © [year of publication], Ed Slott and Company, LLC Reprinted with permission Ed Slott and Company, LLC takes no responsibility for the current accuracy of this information.
For Slott Report articles:
Copyright © [year of article], Ed Slott and Company, LLC Reprinted from The Slott Report, [insert date of article], with permission. [Insert article URL] Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article.
Please contact Matt Smith at [email protected] or (516) 536-8282 with any questions.