Pension Medical Benefits Open to Active Staff at 59.5
IRS ruling allows older employees to access 401(h) medical benefits without jeopardizing the plan's tax-qualified status.
Updated on Oct. 28, 2026 in Retirement Planning
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The Internal Revenue Service now allows pension plans to provide medical benefits to active employees aged 59.5 or older through 401(h) accounts. This update clarifies that such distributions do not threaten a plan's tax-qualified status.
Why it matters
This ruling provides clear regulatory guidance for pension plans to support the medical needs of older workers without risking tax complications. For households with access to these plans, it may create a new path to cover healthcare costs while still employed.
The IRS set the eligibility age for medical benefit distributions at 59.5 via Revenue Ruling 2026-22. This change applies to pension plans utilizing 401(h) account assets.
The players
Internal Revenue Service
The federal agency responsible for tax administration, regulation, and the enforcement of tax laws in the United States.
The details
Pension plans can now leverage assets held within 401(h) accounts to pay for medical expenses incurred by active employees. By meeting the age requirement of 59.5, participants can access these funds for healthcare needs. The ruling explicitly states that these distributions do not compromise the tax-qualified status of the underlying pension plan.
Timeline
The Internal Revenue Service issued Revenue Ruling 2026-22 on October 28, 2026.
Money Landscape
This guidance marks a significant update to how pension plans may support employees navigating healthcare expenses while still working. It clarifies the operational boundaries for 401(h) accounts within the broader federal tax regulatory framework.
Check your specific pension plan documentation to see if your employer adopts these new distribution options for 401(h) assets. If you are aged 59.5 or older, discuss with a financial professional whether your plan's medical expense rules align with your current healthcare budget.
The takeaway
This ruling clarifies that older workers may be able to tap into pension-linked medical benefits without triggering tax penalties. Review your current plan summary and consult a tax professional to understand if your pension is eligible to provide these specific medical distributions.
Further reading
For more on managing long-term savings, visit our Retirement Planning section.
Source note: This article includes information reported by Bloomberglaw.
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