Participant Distributions, Loans, and Related Taxation
Distributions and required minimums
Distributions from a qualified plan are governed by IRC 401(a)(9) and 72(t). The required beginning date is April 1 of the year following the later of attainment of the applicable age or retirement, with 5% owners unable to delay regardless of employment status. SECURE 2.0 set the age at 73 for those reaching 72 after 2022 and 75 for those born in 1960 or later. A still-working non-owner may delay plan RMDs but never IRA RMDs.
Loans
IRC 72(p) permits participant loans up to the lesser of $50,000 (reduced by the highest outstanding balance during the prior 12 months) or 50% of the vested account balance, with a $10,000 floor. Loans must be repaid in level amortized installments at least quarterly within five years unless used to acquire a principal residence. Spousal consent is required if the plan is subject to the QJSA rules.
Taxation
Eligible rollover distributions may be rolled directly to an eligible retirement plan; indirect rollovers face mandatory 20% withholding and a 60-day window. The 10% additional tax under 72(t) has exceptions including age 59½, death, disability, separation from service at or after age 55 (qualified plans only), QDROs, IRS levies, medical expenses above 7.5% of AGI, and substantially equal periodic payments.
Traps
The age-55 separation exception does not apply to IRAs. A loan default is a deemed distribution but does not restore the $50,000 borrowing capacity. The 402(f) notice must be provided no less than 30 and no more than 180 days before the distribution. A missed loan payment can be cured through the end of the calendar quarter following the quarter in which the payment was due.