IRS Notice 87-13

[thepensionmaven]

I am looking for a copy of IRS Notice 87-13 regardiing the exception of the 10% premature withdrawl penalty from a qualified plan to a participant who has separated from service upon attainment of age 55.

Have a situation where a participant terminated employment about 10 years ago( she's also a trustee) and now she is 57 and wants to take money out of a profit sharing plan that allows for distributions, but she doesn't want the 10%.

The way I read 72(t)(2)(a)(v), the plan has to have an early retirement provision, which this plan does not. Even if the plan did, I believe she would have had to have terminated (separated from service)AFTER attaining age 55 AND elected an instalment payout in order to not have the pre-59 1/2 penalty apply. He seems to be hung up on the "retired" language. A terminee is not a retired participant unless he has met the requirements for normal retirement.

The accountant is telling me this couldn't possibly be correct; he postulates that since she is NOW over 55 that she can take a distribution w/o the penalty. I don't see how this has any bearing on the intent of the law.

[Guest LMalone]

The BNA portfolio - "Qualified Plans-Taxation of Distributions" - 370-2d, page A-24 has good information on this. The portfolio also cites the 1986 TRA Blue Book, page 717, which is good info. Both seem to say that the participant must have terminated during or after the year in which he attained age 55. He cannot terminate before then and just wait until he attains age 55 to take advantage of the exception.