Participant is terminated, taking a lump sum distribution and is on disability....do they get special treatment on the tax withholding...he is age 57?

[Jilliandiz]

Profit Sharing Plan, participant is 100% vested and Age 57. He is no longer an employee and is on disability......does he get special tax treatment because of disability. He will be taking a lump sum distribuiton....is he still penalized 20%??

Thanks!

[Jilliandiz]

Ok, the participant terminated in 1/03, he became disabled in 11/03. He is now receiving social security and disability benefits from the gov't. However, if he now takes a distribution from his profit sharing account, does that affect his social security is currently receiving from the gov't?????? help, this is so confusing!!!

Thanks.

[Harwood]

1. The additional tax for early distributions is 10%, not 20%

2. The additional tax does not apply to distributions from plans where you worked and terminated at age 55 and up. IRC 72(t)(2)(A)(iv). So the disability issue [72(t)(2)(A)(iii) doesn't even have to be explored for this person.

3. The distribution is taxable income and rollover-eligible, so 20% withholding applies if not rolled over.