Only the first $1,000 of the distribution is eligible for the exception to the 10% penalty for an emergency personal expense.
IRS website that has Q&A's for this new exception - https://www.irs.gov/irb/2024-28_IRB#NOT-2024-55
Q. A-2: How does an individual determine whether an expense is an unforeseeable or immediate financial need relating to necessary personal or family emergency expenses?
A. A-2: Whether an individual has an unforeseeable or immediate financial need relating to necessary personal or family emergency expenses is determined by the relevant facts and circumstances for each individual. Factors to be considered include, but are not limited to, whether the individual (or a family member of the individual) has expenses relating to --
(a) medical care (including the cost of medicine or treatment that would be deductible under section 213(d), determined without regard to the limitations in section 213(a)),
(b) accident or loss of property due to casualty,
(c) imminent foreclosure or eviction from a primary residence,
(d) the need to pay for burial or funeral expenses,
(e) auto repairs, or
(f) any other necessary emergency personal expenses.
For purposes of determining whether an individual has an unforeseeable or immediate financial need, the administrator may rely on an employee’s written certification that the employee is eligible for an emergency personal expense distribution.
This answer has been verified for accuracy by an Intuit expert employee
