NUA post age 55 and separation from service

Quick question for the forum.
-Client turned 55 last summer (2015) just prior to separation from service and full retirement.
-Client is still 55 this year (2016) and now considering a LSD and taking advantage of NUA.
My question is would a 10% penalty on the basis apply? I wouldn’t think so given they are doing a LSD post age 55 and separation from service, but it isn’t in the same calendar year (2015 vs 2016) of separation of service, which was 2015. Any thoughts are appreciated. Thanks!



All distributions from a plan after separation at 55 are penalty free, regardless of which year the distributions take place, so NUA cost basis will not be subject to penalty.



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