IRS Issues Guidance on SECURE 2.0 - What Plan Sponsors Need to Know

The Notice provides clarification for this new distribution option as follows: * SECURE 2.0 provides an exception to the 10% early distribution penalty tax but does not create a new distribu-tion right in Section 401(k) and Section 403(b) plans. [...]the participant must be otherwise eligible for an in-service dis-tribution, such as on account of a hardship distribution or a disability. * Self-certification is not sufficiënt to demonstrate that a participant is terminally ill. Cash Balance Plans Before the enactment of SECURE 2.0, a cash balance plan with a variable interest crediting rate that increased with the participant's age or service risked violating the anti-backloading provisions if the interest credit rate feil below certain levels. To avoid this risk, some cash balance plans included a minimum interest crediting rate to ensure that interest rates never feil below this floor. [...]cash balance plans no longer need to provide a fixed annual minimum interest crediting rate.