Key Takeaways
- • The IRS issued Revenue Ruling 2026-22 on Wednesday, October 28, 2026, concluding that a pension plan may use assets from a 401(h) account to pay medical benefits to active participants who have not retired but have reached age 59-and-a-half.
- • The ruling holds that such payments do not jeopardize a pension plan's tax-qualified status, provided participants are eligible to receive plan distributions once they reach the required age.
- • A 401(h) account is a subset of a pension plan that can be used to fund retiree medical expenses, and the ruling extends its use to active employees who meet the age threshold.
Summary
The Internal Revenue Service said pension plans can pay out benefits for medical expenses to active employees, as long as those employees are eligible to receive plan distributions once they reach the required age, according to a new ruling reported by Bloomberg Law. The agency issued Revenue Ruling 2026-22 on Wednesday, October 28, 2026.
Under the ruling, a pension plan may use assets from a 401(h) account to pay for medical benefits for participants who have not yet retired but have reached age 59-and-a-half. The IRS concluded that such arrangements do not jeopardize the plan's tax-qualified status. A 401(h) account is a subset of a pension plan that can be used to fund medical expenses.
The primary report was truncated before the full reasoning of the IRS conclusion was available, so further detail on conditions, limits, or implementation guidance could not be confirmed from the source material.
Under the ruling, a pension plan may use assets from a 401(h) account to pay for medical benefits for participants who have not yet retired but have reached age 59-and-a-half. The IRS concluded that such arrangements do not jeopardize the plan's tax-qualified status. A 401(h) account is a subset of a pension plan that can be used to fund medical expenses.
The primary report was truncated before the full reasoning of the IRS conclusion was available, so further detail on conditions, limits, or implementation guidance could not be confirmed from the source material.
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