Application of IRS §72(t)(2)(A)(v) does it apply to All 401(k) plans
My plans SPD states ARTICLE VII BENEFITS AND DISTRIBUTIONS UPON TERMINATION OF EMPLOYMENT When can I get money out of the Plan? You may receive a distribution of the vested portion of some or all of your accounts in the Plan for the following reasons: • termination of employment for reasons other than death, disability or retirement • etc. Does this mean that if my employment is terminated in the year I turn 55 I am not subject to any extra penalties on withdrawals
Quick Answer:
Based on the information provided, if your employment terminates in the year you attain age 55 or later, distributions from this Plan due to that separation from service are generally exempt from the 10% additional tax on early withdrawals.
This exception applies to distributions from qualified plans made to an employee after separation from service if the separation occurs in or after the calendar year the employee attains age 55. Your plan's language regarding "termination of employment" aligns with this requirement.
Therefore, you would typically not be subject to the extra 10% penalty on withdrawals taken after such a termination, provided the distribution is from a qualified plan. Regular income tax will still apply to the taxable portion of the distribution.
Note: This answer is provided for convenience only. It is important that you speak to a CPA about your individual tax situation.
