Qualified plans, 403(b) and 457(b) Plans Only
The distributee is the beneficiary of a deceased retirement account owner, and the amounts are distributed from an inherited/beneficiary retirement account.
The distribution represents non-taxable amounts , such as after-tax contributions to the account
The distribution is due to an IRS levy on the retirement account
The amount is rolled over within 60-days of the participant receiving the distribution
The distribution is a qualified reservist distributions made from elective deferral accounts under 401(k) or 403(b) plans or similar arrangements, or from an IRA.
The participant has unreimbursed medical expenses that are more than 10% (or 7.5% if born before January 2, 1949) of adjusted gross income.
The distributions occurred while the participant is disabled.
The participant is receiving distributions in the form of an annuity, or under a substantially equal periodic payment (SEPP), otherwise referred to as 72(t).
The participant uses the distributions to buy, build, or rebuild a first home.
The distributions are not more than the participant’s qualified higher education expenses.
The amount is converted from a traditional IRA, SEP IRA or SIMPLE IRA, to a Roth IRA. The amount must age in the Roth IRA for five years, otherwise the penalty will apply- unless another exception apply
The distributions are not more than the cost of the participant’s medical insurance, if all of the following conditions apply.
The participant lost his/her your job.
He/she received unemployment compensation paid under any federal or state law for 12 consecutive weeks because he/she lost his/her job.
He/she receive the distributions during either the year he/she received the unemployment compensation or the following year.
He/she receive the distributions no later than 60 days after he/she has been reemployed.
The distribution is made payable to an alternate payee under a qualified domestic relations order (QDRO)
The distribution is made after the participant separates from service in or after the year he/she reaches age 55 (age 50 for qualified public safety employees)
The distribution is made from an employee stock ownership plan for dividends on employer securities held by the plan. QRPs only
The distribution is made from an employer plan under a written election that provides a specific schedule for distribution of the participant’s entire interest if, as of March 1, 1986, the participant had separated from service and had begun receiving payments under the election
Note: Distributions from a 457(b) plan are not subject to the early distribution penalty, unless the amount is attributed to a rollover from another retirement plan that is subject to the early distribution penalty, and the participant does not qualify for an exception. For example, if amounts were rolled over from a traditional IRA to the 457(b) plan, distributions of that amount would be subject to the early distribution penalty unless an exception applies
For details on the requirements that apply to each exception, see IRC§ 72(t), Form 5329 and its instructions, IRS Publications 590 and 575
Additional Helpful Information
Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.
Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs
Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.