The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 allows for a qualified birth or adoption distribution from an eligible plan. Please check with your plan to see if this benefit is available to you.
If your plan allows this option, here’s what you need to know about it.
- If you have a baby or adopt an eligible person, you can withdraw up to $5,000 from your employer retirement plan for each child or adoptee.
- Distributions must be from an eligible defined contribution plan, including a 401(a), 401(k), 403(b) or governmental 457(b) plan.
- Each parent in a participating plan is eligible to take this withdrawal for a total distribution of up to $10,000.
- The withdrawal must be taken within one year of the birth or adoption.
- If you adopt your spouse’s child, you may not submit a request for an adoption withdrawal.
- This benefit is not available for plans in Puerto Rico.
- The $5,000 limit will not be indexed for inflation.
How to initiate a distribution
- Obtain the Birth and Adoption Withdrawal form online or by asking for one by contacting the Customer Care Center.
- Simply follow the instructions for filling out and submitting the form.
What else you should know
- The federal withholding default is 10%. You can opt out of federal withholding or request additional withholding.
- State withholding will be the standard withholding.
- To claim the exception to the 10% tax penalty, you must include the name, age and Social Security number of each child or eligible adoptee on your income tax return for the tax year in which the distribution was made.
- You can also claim the tax benefits through an in-service or separation from employment distribution by treating the distribution as a birth or adoption distribution on your income tax returns.
- You can repay the birth and adoption distribution if you are eligible to make an incoming rollover into the plan. Timing of repayment depends on when you took the distribution. If you took the distribution prior to the SECURE 2.0 Act (December 29, 2022), you have until January 1, 2026 to repay the amount into your retirement account. If you took the distribution after (December 29, 2022), you have up to three years to repay.