The IRA Trustee's document indicates that "proof acceptable to the trustee" is required when requesting a premature distribution due to disability. The IRS Code defines disability for retirement plan accounts in the same manner in which the Social Security Administration does.

So, 1) should a custodian or trustee of a retirement plan allow an SSI acceptance letter as sufficient proof? 2) Also, if the custodian or trustee requires only the physician statement and makes a qualified judgement as to whether or not a distribution will be made under 72(t) for disability - - is it even within the realm of the trustee's duties to make such a judgement? 3) What if the custodian always (under all circumstances) issues a distribution upon receipt of a physician's statement - - and, say for example, SSA denies the claim? 4) What if the custodian actually makes a qualified decision to reject the distribution request and the SSA approved the claim?

Sorry for so many questions...all of your responses are truly appreciated!

From the FAQ section of our web site ay http://72t.Net....

Q. What is the Definition of Disability for 72(t)??
A. The definition of disability can be found in IRC Section 72(m)(7). In one case,Dwyer v. Comm., 106 TC No. 18 (1996), the Tax Court agreed with the IRS and stated...

For purposes of this rule, an individual is considered disabled if "he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long-continued and infinite duration." The Code specifies that an individual must be able to furnish proof of his disability in whatever form and manner that the Service may require. The court noted that the regulations under Section 72 also state that an impairment that is remediable does not constitute a disability.


What you really want to knowis how the Trustee/Custodian will be completing form 1099R

gfweis, thank you for your response. However, I guess that what I am truly trying to get at is:

once acceptable proof of a disability has been submitted to the IRA custodian/trustee, whose responsibility is it to actually review the documentation and make a determination as to whether an individual actually meets the requirements outlined in Sec. 72(m)(7) and approve or deny a distribution reportable under a penalty exception (72t)?

Remember, an IRA is really between the IRS and the IRA owner. In the long run, the IRS has to be satisfied with the proof of disability.

However, if the Trustee/Custodian is ok with the proof and marks the 1099R appropriately, the IRS will probably also be satisfied. If the 1099R isn't marked appropriately, then it's up to the owner to convince (IRS form 5329 [I think]) the IRS not to charge the penalty.