early retirement and in-service withdrawals

[Brian Gallagher]

I have a 401k plan who wants to lower it's early retirement age to 50 yrs old. can a 54 yr old take a distribution while still working w/out the 10% penalty? in otherwords, does becoming 50 become a distributable event in this plan?

[Guest greggi39]

the aspa c-3 book (page 119) " elective deferrals can not be distributed after a fixed number of years or the attainment of an age earlier than age 59.5"

[E as in ERISA]

Whether something is a "distributable event" is a separate question from whether it is subject to the "10% penalty."

[MWeddell]

Code Section 72(t), the provision governing the 10% early distribution excise tax, at point depended on the plan's definition of retirement age, but quite awhile ago (TRA '86 or maybe a couple years before that) the provision was changed so that the exception applies to separation from service after attainment of age 55 (although it's enforced as if it was separation from service during or after the year in which the participant attained age 55). Anyway, if you've been in employee benefits long enough, you might be remembering the old rule.