72(t) (SEPP) and NUA
If someone wants to take advantage of NUA and is below the age of 59.5 and the rule of 55 doesn’t apply, can that individual establish substantially equal periodic payments from the IRA to avoid the early distribution penalty?
If someone wants to take advantage of NUA and is below the age of 59.5 and the rule of 55 doesn’t apply, can that individual establish substantially equal periodic payments from the IRA to avoid the early distribution penalty?
Permalink Submitted by David Mertz on Tue, 2020-11-10 17:04
NUA has nothing to do with any distribution from an IRA. NUA treatment can only happen with a distribution of from a qualified retirement plan. Because NUA treatment requires a lump-sum distribution from the plan, it’s incompatible with a 72(t) SEPP plan established on that same plan. Some other penalty exception (perhaps the medical-expense and disability exceptions are the only possibilities) would have to apply to avoid the early-distribution penalty on a distribution that includes a distribution of NUA.