72T question
A client has a 72T plan that runs annually for 2years and is reported as a “premature” distribution. The client is now disable and would like to have the reporting on the 1099 moving forward changed to the disability code. If they change the coding would this break the 72T plan? Thank you.
Permalink Submitted by Alan - IRA critic on Wed, 2018-06-13 03:17
The client may request a statement from their MD indicating that the client is disabled in accord with Sec 72(m(7), and submit the the MD’s signed statement to the IRA custodian with a request to change the 1099R coding to “3” (Disability). This will automatically terminate the 72t plan and the client will be free to distribute any amount they wish without penalty. If client cannot secure the signed statement they could still File Form 5329 and show an exception code of “03” in the same manner that they are using now except using code 02 to claim the SEPP exception. Note that the disability must considered to be of a long or permanent nature in order to comply with Sec 72(m)(7).