Distribution Codes

[Guest Nautical]

My question is in regards to whether or not distribution codes need to be updated when a participant reaches age 59 1/2? For example, a participant begins receiving a qualified monthly defined benefit payment at age 55. He is set up as a distribution code "2". When he reaches age 59 1/2, would his distribution code need to be updated to a "7"? Or does the participant's distribution code remain "2" if no changes are ever made to his monthly benefit. I looked through the 1099-R instructions and it indicates that "7" is used for a normal retirement. The instructions don't mention anything about updating the code unless the distribution type changes. Is it just assumed by the IRS that a plan administrator will update the codes?

Thank you

[AndyH]

It appears to me that a monthly pension for life should always be coded as a 7. I agree this is not clear from the instructions but such a monthly pension does not fit the requirements for code 2 and code 7 includes all other.

[WDIK]

See here.

[Guest Nautical]

Looks like this is a "hot" topic Thanks for the link....

[Guest Nautical]

The good news is I have done some research and "2" and "7" appear to be taxed the same for participants receiving monthly pension payments. One other question, when would someone have a distribution code of "1"? I assume this is for a lump sum distribution under the age of 55 correct? Could a "1" be used for someone that is 50 receiving a monthly payment? If that is the case the participant probably would have to complete an IRS form to avoid the 10% tax penalty. I think I need a course on distribution codes and tax implications