Long-Term Care Distributions From Defined Contribution Plans – This is New!

Section 334 of SECURE 2.0 allows defined contribution plans to make “qualified long-term care distributions” without the additional 10% tax on early distributions under Section 72(t) of the Internal Revenue Code. It also imposes new reporting obligations on long-term care insurance issuers. This provision is effective for distributions made after December 29, 2025. 

Recently-issued IRS Notice 2026-33 provides necessary guidance on long-term care distributions. Here’s what you need to know.

1. What is a “qualified long-term care distribution”?

A distribution made during the taxable year that does not exceed the least of the following:

• Premiums paid by or assessed to the employee during the year for certified long-term care insurance covering the employee or the employee’s spouse; 
• An amount equal to 10% of the present value of the vested accrued benefit of the employee under the plan; or
• $2,600 (adjusted for inflation).

A distribution will be considered a qualified long-term care distribution only if a “long-term care premium statement” (see Q-5 below), which can be relied on by the plan administrator in making the distribution, is filed with the plan.   

2. Is the provision optional? 

Yes. Plans aren’t required to offer this feature. But unlike other Section 72(t) exceptions, if the provision is not offered, the relief is not otherwise available through the participant’s tax return.

3. Is a plan amendment needed, and by when? 

Yes. If the plan offers this feature, then the plan document must reflect the provision. Any plans subject to the SECURE 2.0 Act deadline of December 31, 2026 (generally all plans other than collectively bargained and governmental plans) get a one-year extension, until December 31, 2027, to adopt the amendment.

4. What is the tax treatment of the distribution? 

It’s treated as a plan distribution, reported on Form 1099-R, and is generally taxable. However:

• It is not subject to the 10% additional tax under Section 72(t), regardless of the participant’s age. 
• It is not treated as eligible rollover distributions for purposes of Code sections 401(a)(31) (direct rollover rules), 402(f) (rollover notice), and 3405 (mandatory withholding), but it is subject to 10% withholding, unless participant elects out.
• It is treated as distributable under Code sections 401(k), 403(b), and 457(d). So, for example, a 401(k) plan can permit long-term care distribution attributable to elective deferrals, qualified nonelective (QNEC), qualified matching (QMACs), or safe harbor contributions. 
• There is no repayment right (unlike other 72(t) exceptions).

5. What are the reporting requirements for the issuer?

There are three reporting requirements, described below.

Long-Term Care Premium Statement

The long-term care insurance issuer must provide a “long-term care premium statement” to the plan, at a participant’s request, on a calendar year basis by February 1 of the following year. It must include:

• Issuer’s name and taxpayer identification number;
• Statement that the coverage is certified long-term care insurance under Code section 401(a)(39)(C);
• Identification of the employee as the owner of the coverage;
• Identification of the covered individual and their relationship to the employee;
• Premiums owed for the coverage for the calendar year; and
• A statement that the issuer has satisfied the Issuer Disclosure requirement described below.

Form 1099-LPS

A similar statement must be furnished to the participant (and the insured, if not the employee) and the IRS. The written statement must include the name, address, and phone number of the insurance issuer, and the total premiums and charges paid for the insured individual during the calendar year. The IRS developed Form 1099-LPS (Long-Term Care Premiums Paid Statement) for this purpose, and it is due to the participant by January 31 of the following year to which the Form 1099-LPS relates, and filed with the IRS no later than February 1. For insurance covering more than one individual, the long-term care premium statement and the Form 1099-LPS should report only the portion of the premium that is properly allocable to the insured.

If a participant requests a Form 1099-LPS before the end of the calendar year, it must be furnished to the participant and filed with the IRS at that time. Alternatively, the issuer can provide the name, address, and phone number of the contact person for the issuer, as well as the total amount of premiums and charges paid for the insured individual as of the date of the request.

Issuer Disclosure

For a long-term premium care statement to be accepted by the plan, the issuer must file an Issuer Disclosure with the IRS, which must include: 

• The issuer’s contact information, including the name, address, and taxpayer identification number, as well as the name and telephone number of a person to contact at the issuer;
• A general description of the type of long-term care coverage provided;
• A statement that the coverage offered is certified long-term care insurance under Code section 401(a)(39)(C);
• A statement that the coverage offered has been filed with and approved by a State regulatory authority, including the identity of the State regulatory authority; 
• A penalties of perjury statement, signed by the issuer, as follows: “Under penalties of perjury, I declare that I have examined this disclosure to the IRS, and, to the best of my knowledge and belief, the facts presented in this disclosure are true, correct, and complete.”

Additional information will be posted on the IRS.gov website.

6. What information might the insurer need from the participant?

An issuer may ask the participant for various information needed to provide the long-term care premium statement, including the name and current mailing address of the plan, the name and contact information of the plan administrator, whether the plan offers qualified long-term care distributions as a distribution option, the participant’s name and contact information, and, if the participant is not the covered individual, the name of the covered individual and their relationship to the participant. An insurer may rely on the information provided by the participant to the insurer in response. 

Next Steps

For interested plan sponsors and issuers, we now have a much clearer picture of the steps involved in long-term care distributions. The plan administrator’s ability to rely on the statements by the issuer to support the distribution is especially helpful. This new guidance may generate interest in offering this new distribution option. Please reach out to your Groom attorney with any questions or for assistance in implementing qualified long-term care distributions.

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