Guide to the Early Distribution Penalty Exceptions for Distributions from Retirement Accounts

Program Name: Appleby’s Guide to the Early Distribution Penalty Exceptions for Distributions from Retirement Accounts 

Overview

Distributions from retirement accounts that occur before the account owner reaches age 59½ are subject to a 10% additional tax, unless an exception applies.

Eligibility for any of these exceptions is determined by several factors, including the type of account from which the distribution is made.  Making a wrong move can result in a retirement account owner losing eligibility for an exception. In some cases, exceptions can only be claimed through proper reporting on the individual's tax return.

Major Topics

• ·         Early distribution penalty
• ·         Exceptions to the age 59½ rule
• ·         Substantially equal periodic payments
• ·         Exceptions by plan/account type
• ·         Transfer and rollover rules and their effects on qualifications for the exceptions
• ·         Claiming the exception when an IRA custodian's tax reporting shows no exception
• ·         The rules that apply to the different exceptions

Learning objectives

• ·         To be able to identify distributions that might be subject to the 10% early distribution penalty.
• ·         To ensure that clients who qualified for the exceptions do not pay the 10% early distribution penalty because of conflicting tax reporting by IRA custodians and plan trustees.
• ·         To understand the tax reporting requirements that apply to early distributions.
• ·         To determine suitability for the substantially equal periodic payment program.