Probably. But insurance companies may use different definitions of disability. The definition the IRS uses is Sec 72(m)(7) as follows:

72(m)(7) MEANING OF DISABLED. –For purposes of this section, an individual shall be considered to be disabled if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long-continued and indefinite duration. An individual shall not be considered to be disabled unless he furnishes proof of the existence thereof in such form and manner as the Secretary may require.

Accordingly, he should ask his 401k plan administrator if his distribution will be coded with the disability code 3 in Box 7 of the 1099R. If so, he will be OK. If they will not issue code 3, then he should get a letter from his MD stating that he is considered disabled according to the definition copied above, send it to the plan administrator and ask for the code 3. If they will still not provide code 3, then he can still take the distribution and override the code 1 by filing Form 5329 and claiming exception code 03 on the form.  If he has the letter in the event the IRS inquires about the penalty, good chance the IRS will accept his 5329 form and waive the penalty. The 5329 is filed with his tax return.

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