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Healthcare Provider Update: Verizon collaborates with Aetna as its primary healthcare provider, offering a range of health plans and services to its employees and their families. Looking ahead to 2026, the healthcare landscape is poised for significant change, as record hikes in Affordable Care Act (ACA) premiums are anticipated. With some states facing increases exceeding 60%, many individuals could see their out-of-pocket premiums rise by more than 75%, particularly if enhanced federal premium subsidies are not extended. This scenario could create an additional burden for Verizon employees, emphasizing the importance of strategic planning for healthcare coverage amidst such dramatic shifts in costs. Click here to learn more
'Verizon employees considering a 72(t) strategy should take time to understand how long-term withdrawal commitments fit into their broader retirement goals,' — Wesley Boudreaux, a representative of The Retirement Group, a division of Wealth Enhancement.
'Verizon employees weighing a 72(t) withdrawal schedule should carefully assess how a long-term income commitment fits into their overall retirement strategy before getting started,' — Patrick Ray, a representative of The Retirement Group, a division of Wealth Enhancement.
In this article, we will discuss:
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How Rule 72(t) works for early withdrawals.
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The IRS-approved methods used to calculate substantially equal periodic payments (SEPPs).
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Key considerations, benefits, and limitations of using a SEPP plan.
Early Withdrawals With Substantially Equal Periodic Payments (SEPPs)
Verizon employees preparing for retirement may benefit from understanding IRS Rule 72(t). This rule allows individuals to access retirement accounts before age 59½ without the standard 10% early withdrawal penalty. This exemption applies when withdrawals follow the Substantially Equal Periodic Payments (SEPP) structure outlined in IRS regulations. These payments must continue for at least five years or until the account holder reaches age 59½, whichever occurs later.
The IRS typically imposes a “recapture” of the 10% penalty on all previous SEPP distributions—along with interest—if a plan is stopped or modified too early. Adjustments can only be made under limited circumstances, such as death, disability, qualified public safety distributions, full account depletion, or a one-time permitted calculation change. 1
The major benefits and limitations of Rule 72(t), as well as the IRS-approved calculation methods, are summarized below for Verizon employees.
What Is Rule 72(t)?
Under Rule 72(t), individuals who withdraw funds from IRAs or employer-sponsored retirement plans such as 401(k)s before age 59½ through a SEPP schedule can bypass the 10% early withdrawal penalty. Even though the penalty is waived, SEPP withdrawals are still treated as taxable ordinary income.
Each SEPP plan must apply to a single retirement account; anyone wanting to withdraw from multiple accounts must establish a separate SEPP plan for each one.
How SEPP Plans Work
Before a SEPP plan is initiated, you must select one of three IRS-approved methods to calculate the annual withdrawal amount:
1. Required Minimum Distribution (RMD) Method
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Annual payments change based on the account balance and IRS life expectancy factors. Using this method generally results in lower withdrawals than the other methods.
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2. Fixed Amortization Method
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Annual payments remain the same each year and are calculated using an IRS-approved interest rate, the account balance, and IRS life expectancy formulas.
3. Fixed Annuitization Method
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Annual payments remain consistent throughout the SEPP period and are calculated using an IRS-approved interest rate along with an annuity factor from IRS mortality tables.
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All three methods rely on IRS life expectancy or mortality tables, with the choice determined by whether the calculation uses a single life or joint lifetimes.
The IRS may retroactively impose the 10% penalty if a SEPP schedule is altered before the required commitment is fulfilled.
Benefits of Using the 72(t)/SEPP Rule
10% Early Withdrawal Penalty Is Eliminated
A SEPP schedule removes the 10% early withdrawal penalty that typically applies. For example, bypassing the penalty on a $30,000 annual withdrawal may prevent a $3,000 tax cost.
Creates a Consistent Income Stream
SEPP withdrawals follow a structured pattern, offering a stable source of income before traditional retirement ages.
Flexibility in Calculation Method Selection
Individuals can choose among IRS-approved methods to align withdrawal amounts with their goals.
Drawbacks of Using the 72(t)/SEPP Rule
Reduces Future Retirement Savings
Withdrawing funds early means less money remains invested for later years.
The SEPP Schedule Is Difficult to Change
Except for rare exceptions, altering or stopping SEPP payments before the required period results in penalties and retroactive fees.
No Additional Withdrawals Allowed
Any withdrawal beyond the scheduled SEPP amount may trigger the 10% penalty.
Other Penalty-Free Withdrawal Alternatives
Verizon employees may want to review these alternatives before committing to a SEPP plan:
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- Certain IRA withdrawals related to medical expenses, education expenses, disability, or health insurance premiums while still working
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- 401(k) loans, depending on vested balances and loan limits
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- The IRS Rule of 55, which allows penalty-free 401(k) withdrawals for those who leave an employer in or after the year they turn 55.
Each option has distinct rules, so it is important to compare them before choosing the approach that works best for you.
Who Might Consider a 72(t)/SEPP Plan?
A SEPP plan may appeal to individuals—including Verizon employees—who:
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- Plan to retire early
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- Need income before pensions or Social Security begin
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- Have sufficient retirement savings
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- Face financial challenges, such as medical needs or major expenses
However, because SEPP plans are rigid and long-lasting, they require careful planning.
How The Retirement Group Can Help
Navigating a SEPP plan can be complicated, and errors can create costly IRS penalties. The Retirement Group can help you evaluate whether a 72(t)/SEPP plan aligns with your retirement goals and guide you through the process.
If you have questions about early retirement planning or evaluating SEPP options, you can contact The Retirement Group at (800) 900-5867 for assistance.
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- How Are Workers Impacted by Inflation & Rising Interest Rates?
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Sources:
1. Internal Revenue Service. Substantially equal periodic payments . 26 Aug. 2025.
2. Kagan, Julia. “Understanding the 72(t) Rule: Penalty-Free IRA Withdrawals Explained.” Investopedia , 20 Sept. 2025, www.investopedia.com/terms/r/rule72t.asp .
3. “What Is 72(t) Rule? How Does SEPP Work?” Fidelity Viewpoints , 6 Oct. 2025, www.fidelity.com/learning-center/personal-finance/72t-rule .
4. Schroeder, Jacob. “Retire Before 59.5: The IRS Rule to Unlock Your IRA or 401(k) Cash Penalty-Free.” Kiplinger , 15 Oct. 2025, www.kiplinger.com/retirement/how-sepp-72-t-can-help-you-retire-early-and-dodge-penalties .
5. Adams, Hayden. “When Can You Withdraw? 401(k)s and the Rule of 55.” Charles Schwab , 1 Apr. 2025, www.schwab.com/learn/story/retiring-early-5-key-points-about-rule-55 .
How does the Verizon Pension Plan facilitate retirement income for long-term employees, and what specific benefits can employees expect when enrolling in the retirement program provided by Verizon? What unique features does the Verizon Pension Plan offer compared to other retirement plans an employee might have encountered, and how can employees maximize the benefits of these features throughout their career at Verizon?
Verizon Pension Plan Benefits: Verizon's Pension Plan offers substantial benefits aimed at facilitating a secure retirement for long-term employees. Upon enrolling in the retirement program, employees can expect defined benefits that are based on their salary and years of service, ensuring a predictable and stable income after retirement. Unique to Verizon, compared to some other plans, may include options for early retirement under certain conditions and a choice between annuity payments or a lump-sum distribution upon retirement. Employees can maximize these features by planning for long-term service and considering their retirement income needs early in their careers.
In what ways can employees at Verizon strategize their rollover decisions when transitioning from the Verizon Pension Plan to other retirement savings plans upon leaving the company? What factors should be considered by Verizon employees to ensure they are making informed choices regarding rolling over funds to a traditional IRA or another qualified employer plan?
Rollover Strategies: When transitioning from the Verizon Pension Plan to other retirement savings options upon leaving the company, employees should strategize their rollover decisions carefully. Factors to consider include the tax implications, the investment options available in the rollover destination, and the timing of the transfer to avoid penalties. Verizon employees should evaluate the benefits of rolling over to a traditional IRA or another employer's plan, considering their future financial needs and retirement goals.
What are the implications of the recent IRS limits for 2024 concerning contributions to retirement plans for Verizon employees, and how does Verizon align its offerings with these federal regulations? Additionally, how can Verizon employees best take advantage of these limits to enhance their retirement savings while adhering to tax regulations?
IRS Contribution Limits: The implications of IRS limits for 2024 are critical for Verizon employees as these limits dictate how much can be contributed tax-deferred into retirement plans. Verizon aligns its offerings with these federal regulations by adjusting contribution limits in their plans accordingly. Employees are encouraged to maximize their contributions to take full advantage of tax-deferred growth, especially when IRS limits increase, thereby enhancing their retirement savings while adhering to tax regulations.
How does the special tax treatment for lump sum distributions from the Verizon Pension Plan affect employees who receive their benefits early or have specific circumstances, such as being born before 1936? What options do these employees have to manage their tax burden effectively, and how can they best navigate these complicated rules while planning for their retirement?
Tax Treatment of Lump Sum Distributions: The special tax treatment for lump sum distributions from the Verizon Pension Plan can significantly affect employees who opt to receive their benefits early or under specific circumstances like being born before 1936. These employees have options to manage their tax burden effectively by opting for ten-year averaging or capital gain treatment on eligible distributions, allowing for a potentially lower tax rate on their pension benefits.
For surviving spouses and alternate payees of Verizon employees, what are the specific benefits available under the Verizon Pension Plan? How do these benefits compare to those available to employees, and what steps must surviving spouses or alternate payees take to ensure they receive their entitled benefits without delays or complications?
Benefits for Surviving Spouses and Alternate Payees: For surviving spouses and alternate payees, the Verizon Pension Plan offers benefits similar to those available to employees, such as annuity payments or lump-sum options. These beneficiaries must take certain steps to ensure they receive their benefits without delays, such as providing necessary documentation and adhering to plan rules. The plan details and processes for claiming benefits should be clearly understood to avoid complications.
How can Verizon employees utilize the resources available through the Verizon Benefits Center to better understand and manage their retirement benefits? What specific tools and services does the Benefits Center provide, and how can these resources assist employees in making informed decisions regarding their pension plan options?
Utilizing Resources at the Verizon Benefits Center: Verizon employees can utilize various tools and services provided by the Verizon Benefits Center to manage and understand their retirement benefits. The Benefits Center offers personalized consultations, detailed plan documentation, and tools for estimating pension benefits and planning retirement income, assisting employees in making informed decisions about their pension plan options.
What challenges might Verizon employees face regarding eligibility and tax withholding when receiving their pension payments, and how can they mitigate these issues? It's crucial for employees to understand the mechanics of eligibility regarding rollovers and payment processing; what key pieces of information should they be aware of to avoid unexpected taxes?
Challenges in Eligibility and Tax Withholding: Verizon employees might face challenges regarding eligibility and tax withholding when receiving pension payments. Understanding the plan's criteria for eligibility, the implications of rollovers, and the impact of mandatory withholding on distributions is crucial. Employees can mitigate these issues by consulting with the Verizon Benefits Center or a tax advisor to ensure compliance and avoid unexpected taxes.
What is the process for Verizon employees wishing to initiate a direct rollover from the Verizon Pension Plan, and what documentation will they need to prepare? Can employees receive assistance from the Verizon Benefits Center during this process, and how does using a direct rollover benefit them compared to other forms of payment?
Direct Rollover Process: The process for initiating a direct rollover involves deciding the destination of the rollover (traditional IRA or another employer plan), completing necessary documentation, and potentially seeking assistance from the Verizon Benefits Center. A direct rollover helps in avoiding immediate taxes and maintaining the tax-deferred status of retirement savings.
In terms of retirement preparedness, how does the pension plan at Verizon accommodate employees’ needs for financial security in their senior years? What additional education or resources does Verizon provide to assure that employees fully understand their retirement options and the importance of planning ahead?
Retirement Preparedness: Verizon's pension plan is designed to accommodate the financial security needs of employees in their senior years. In addition to the pension benefits, Verizon provides educational resources and planning tools to ensure employees understand their retirement options and the importance of early and consistent retirement planning.
How can employees reach out to the Verizon Benefits Center for further information about the pension plan and other retirement benefits? What specific contact methods are available to employees, and how can these interactions enhance their understanding and management of retirement benefits provided by Verizon?
Contacting the Verizon Benefits Center: Verizon employees seeking more information about their pension plan and other retirement benefits can reach out to the Verizon Benefits Center through various contact methods such as phone, email, or online portals. These interactions are crucial for enhancing understanding and effective management of retirement benefits, ensuring employees make the most of the benefits available to them.
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