New IRS Guidance on Using Retirement Funds for Long-Term Care Insurance Premiums
Long-term care planning continues to be one of the most important, and often overlooked, parts of retirement and estate planning. Many families are surprised to learn how expensive long-term care can be, and how quickly nursing home, assisted living, or in-home care costs can impact a lifetime of savings.
A recent IRS notice gives us one more planning point to discuss.
The IRS recently issued Notice 2026-33, which provides guidance on a provision of the SECURE 2.0 Act that allows certain retirement plan distributions to be used to help pay for qualified long-term care insurance premiums.
Beginning December 29, 2025, defined contribution plans, such as certain 401(k) plans, may choose to allow participants to take distributions from their plan accounts to pay premiums for a qualified long-term care insurance contract.
This does not mean every retirement plan will offer this option. The IRS made clear that this is an optional plan feature, so whether it is available will depend on the specific retirement plan.
How Much Can Be Distributed?
Under the SECURE 2.0 provision, participants may take annual distributions for qualified long-term care insurance premiums in an amount equal to the lesser of:
The actual cost of the premiums;
10% of the participant’s vested retirement account balance; or
$2,600 for 2026, with that dollar amount indexed for future years.
These distributions are not free from income tax. The participant may still owe income tax on the amount distributed. However, if the distribution qualifies, it is not subject to the 10% early withdrawal penalty that often applies to early retirement plan distributions.
That distinction matters. For someone who needs to access retirement funds to maintain long-term care insurance coverage, avoiding the additional early withdrawal penalty could be helpful.
What Documentation Is Required?
The IRS guidance also clarifies that a distribution will not be treated as a qualified long-term care distribution unless the plan receives a proper long-term care premium statement.
That statement must come from the issuer of the long-term care coverage and must include certain information, such as:
The identity of the insurance issuer;
The identity of the employee who owns the coverage;
A description of the coverage; and
Other required information regarding the long-term care insurance contract.
In other words, this is not simply a matter of asking for money from a retirement account and saying it will be used for long-term care premiums. There must be documentation supporting the distribution.
What Does This Mean for Families?
This new guidance is a reminder that long-term care planning should not be put off until a crisis occurs.
Long-term care insurance can be a valuable tool for some families, but it is only one part of the larger planning picture. Families also need to consider powers of attorney, estate planning documents, asset protection strategies, Medicaid eligibility rules, and how care costs may affect a spouse or children.
For some individuals, this new option may provide another way to maintain long-term care insurance coverage. For others, it may not be available at all if their retirement plan does not adopt the feature.
The key takeaway is this: long-term care planning is not one-size-fits-all. The best plan depends on your assets, income, health, family structure, insurance coverage, and goals.
Planning Ahead Matters
Waiting until long-term care is needed can severely limit your options. Early planning can help protect your assets, reduce stress on your loved ones, and create a roadmap for what happens if care is needed in the future.
If you have questions about long-term care planning, Medicaid planning, asset protection, or whether your current estate plan is prepared for a long-term care event, speaking with an elder law attorney can help you understand your options before a crisis arises.
At Willett Legal, we help families plan for incapacity, long-term care, and the protection of what they have worked hard to build.
Planning now is a gift to your future self and to the people who may one day have to step in and help you.
This post is for informational purposes only and is not legal or tax advice. You should consult with your legal, tax, and financial advisors before making decisions about retirement accounts, insurance, Medicaid planning, or long-term care planning.
