Guest Kathleen Fouquet Posted January 26, 2001 Share Posted January 26, 2001 A DB plan participant is taking early retirement at age 55 and will be receiving monthly payments as calculated by the plan's actuary. What is the proper code to use in Box 7 of the 1099R? Should it be a 2, early distribution - exception applies, or 7 for normal distribution? Link to comment Share on other sites More sharing options...
Guest Posted January 26, 2001 Share Posted January 26, 2001 We use code 2 in your situation. It is not a normal (code 7) distribution as it is prior to normal retirement age. Link to comment Share on other sites More sharing options...
Guest Kathleen Fouquet Posted January 29, 2001 Share Posted January 29, 2001 Thank you for your reply. I agree with you, but the employer is saying that since a DB payout is an annuity (can't be altered or rolled), he believes the code should be 7. So I thought I would check with others in the business. Link to comment Share on other sites More sharing options...
Guest Posted January 29, 2001 Share Posted January 29, 2001 Kathleen, The issue is controlledb the plan document. Normal distribution, relates to not an early distribution. Link to comment Share on other sites More sharing options...
Guest AFRICA6796 Posted February 12, 2001 Share Posted February 12, 2001 Distributions from a qualified retirement plan (other than an IRA) after your separation from service in or after the year you reached age 55 are not subjected to the 10% premature penalty, i.e. they are an exception. However, unlike distributions for substantially equal series payments, 72(t) distributions, the IRS does not require a custodian or plan administrator to report these distributions with a code 2 (early distributions with a known exception). As a result, most custodians will report such distributions with a code 1. If the employer issues their own 1099-R, they may use a code 2. It CANNOT be a code 7, as code 7 is for distributions taken after age 59 ½. If the 1099-R is issued with a code 1, then the participant may file IRS Form 5329 to claim the exception to the penalty. Link to comment Share on other sites More sharing options...
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