Roth Distribution Question

[Vlad401k]

Let's say a participant is 60 years old, but has the funds in the Roth account for only 2 years when he requests a distribution. Two questions:

1. The 10% penalty doesn't apply and the 1099-R code is simply "B", correct? The participant simply pays taxes on earnings because it's not a qualified Roth distribution...

2. Let's say the participant is actually 40 years old. In that case codes "B1" are used. However, does the 10% penalty apply to the WHOLE distribution amount or just the taxable (earnings) amount?

[Lou S.]

recovery of basis is not taxable and not subject to the 10% penalty. In #2 the tax an penalty would be on earnings only.