403(b) distribution post 55, pre 59 1/2
Please answer this question:
If my client retired from a NY State school district (non-ERISA) and wants to withdraw from her 403(b), will she incur the 10% premature distribution penalty from the IRS? Assume that 72(t) is not an option and there is no death distribution, disability or other exception.
Second: same set of facts, except an ERISA 403(b).
Thank you.
Dave Mirabito
Permalink Submitted by Alan Spross on Wed, 2008-01-09 00:04
The age 55 separation from service exception applies to any 403b plan, whether subject to ERISA or not. For purposes of the early withdrawal exception, a 403b is considered a qualified retirement plan.
The age 55 exception applies when the separation occurs in the year the employee reaches 55 or later, even if the separation occurred before the employee’s birthday. For part time workers, the plan document must be consulted to determine if the remaining work negates separtion status or not.
Permalink Submitted by Charles Stanley on Tue, 2014-09-16 13:03
Just wanted to confirm that a school employee with a 403b who separates from employment before age 55 is not eligible for penalty free distributions upon reaching age 55 or later. Thanks!
Permalink Submitted by Alan - IRA critic on Tue, 2014-09-16 20:06
That is correct if the separation occurs prior to the year employee will reach 55. At that point penalty free solutions would be limited to either waiting till 59.5 to take distributions, qualifying for a different penalty exception, or starting a rigid 72t plan.