72t Distributions and terminal illness
Hello all. First, I apologize if this topic has already been discussed, but new here and haven’t yet found the answer to my questions.
My client’s father has been diagnosed with cancer and is told he has about 6 months. He is only 57 and started 72t distributions 18 months ago. He is in need of additional funds for medical expenses and wanted to know the consequences of taking more than his calculated SOSEPP. Does his unfortunate terminal illness qualify as a “disability”? And how would the previous distributions be treated if he interrupts the 72t SOSEPP?
Any guidance would be greatly appreciates. M
Permalink Submitted by Alan - IRA critic on Tue, 2014-02-25 19:48
This meets the definition of disability under Sec 72(m). He should send a copy of the MD evaluation to the IRA custodian and request that his 1099R be coded “3” for distributions taken beginning in 2014. His 72t plan can be considered ended as of 12/31/2013 with no retroactive penalty, and he can take any distribution he wants from here on without penalty. If there is a need for the disability to have started before 2014 to eliminate penalties in 2013, please advise. Note that he should verify the custodian acceptance of the medical evidence for the coding of 3 on future 1099R forms and submit any additional evidence the custodian requires.