The IRS released comprehensive tax guidance on qualified long-term care distributions in its June 2026 bulletin, establishing rules for how employees can withdraw retirement savings to pay for certified long-term care insurance without facing the standard 10% early withdrawal penalty.
Quick Facts
- Annual distribution limit: the lesser of premiums paid, 10% of vested account balance, or $2,600 (adjusted for inflation)
- Guidance issued May 20, 2026, published in IRS Internal Revenue Bulletin 2026-24 on June 8, 2026
- Insurance issuers must file an Issuer Disclosure with the IRS before any distributions can occur
- Plan amendment deadline extended to December 31, 2027 for most defined contribution plans
Notice 2026-33 implements Section 334 of the SECURE 2.0 Act, enacted in December 2022, which permits defined contribution plans to offer qualified long-term care distributions. The tax guidance addresses requirements for insurance issuers, plan administrators, and individuals receiving these distributions.
Employees seeking a qualified long-term care distribution must request that their insurance issuer file a “long-term care premium statement” with their plan. The issuer must first complete an Issuer Disclosure with the IRS, identifying the issuer, coverage type, and confirming that the coverage has been filed with and approved by a state regulatory authority. Plan administrators can rely on the issuer’s statement that this disclosure has been made.
The distributions are not treated as eligible rollover distributions, meaning they cannot be rolled over to another retirement account and are not subject to the mandatory 20% withholding rule. However, the distributions remain subject to ordinary income tax and standard withholding rules. Unlike certain other early distribution exceptions, qualified long-term care distributions cannot be repaid to a plan within a three-year period.
Insurance issuers must report these distributions using the new Form 1099-LPS, “Long-Term Care Premiums Paid Statement,” filed with the IRS by February 1 of the following calendar year. Issuers must also furnish written statements to employees and covered individuals by January 31 of the year the form is filed.
Participation in the qualified long-term care distribution program is optional for employers. Plan sponsors that are not governmental plans or public school section 403(b) plans have until December 31, 2027, to amend their plans to permit these distributions. Applicable collectively bargained plans have until December 31, 2028, and governmental plans until December 31, 2029.
The guidance clarifies that “certified long-term care insurance” includes qualified long-term care insurance contracts, life insurance riders covering chronic illness, and annuity riders that meet specific requirements. Coverage must provide “meaningful financial assistance” for home-based or nursing home care, including inflation adjustments and consumer protections.
Sources
- Internal Revenue Service — IRS Internal Revenue Bulletin 2026-24 (June 8, 2026), containing Notice 2026-33 with comprehensive guidance on qualified long-term care distributions, issuer disclosure requirements, and plan amendment deadlines
- Bloomberg Tax — reporting on the IRS notice establishing requirements for insurance issuers, plan administrators, and the new Form 1099-LPS reporting requirements
- Ascensus — summary of Notice 2026-33 confirming annual distribution limits and the penalty-free withdrawal provision under SECURE 2.0
