If the individual fails to remain an eligible individual during the testing period, he or she will have to include the distribution in income and the amount is subject to the 10% early distribution penalty . An exception applies if the individual ceases to be an eligible individual by reason of death or disability. The testing period is the period beginning with the month of the contribution and ending on the last day of the 12th month following such month. The amount is includible for the taxable year of the first day during the testing period that the individual is not an eligible individual.
- The provision does not apply to SIMPLE IRAs and SEP IRAs.
Applicable RMD Age The first year for which an IRA owner or plan participant must begin to take RMDs from their tax-deferred retirement account. RMDs