That’s correct. There should be no early withdrawal penalty on the taxable cost basis for the LSD due to the age 55 exception. He should also do the LSD this year, or if in a later year he should avoid any intervening distributions between separation and the year of the LSD.

Of course, if he slipped up, he gets another triggering event when he reaches age 59.5 that would reinstate his ability to execute a qualified LSD.

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Attached is a copy of Code Section 402(e)(4)(D) defining an LSD. Note the reference to attaining age 59.5. The separation from service exception is no longer needed at that point since age 59.5 is a new triggering event that wipes away any prior intervening distribution:
>>>>>>>>>>>>>>>>>>

(D) Lump-sum distribution
For purposes of this paragraph –
(i) In general
The term “lump-sum distribution” means the distribution or payment within one taxable year of the recipient of the balance to the credit of an employee which becomes payable to the recipient –
(I) on account of the employee’s death,
(II) after the employee attains age 59 1/2 ,
(III) on account of the employee’s separation from service, or
(IV) after the employee has become disabled (within the meaning of section 72(m)(7)), from a trust which forms a part of a plan described in section 401(a) and which is exempt from tax under section 501 or from a plan described in section 403(a). Subclause (III) of this clause shall be applied only with respect to an individual who is an employee without regard to section 401(c)(1), and subclause (IV) shall be applied only with respect to an employee within the meaning of section 401(c)(1). For purposes of this clause, a distribution to two or more trusts shall be treated as a distribution to one recipient. For purposes of this paragraph, the balance to the credit of the employee does not include the accumulated deductible employee contributions under the plan (within the meaning of section 72(o)(5)).
>>>>>>>>> >>>>>>>>>>

Please advise if you still have a problem as there are other professional analysis sources on NUA that also agree with this.

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earlier in this thread, you offered: “Please advise if you still have a problem as there are other professional analysis sources on NUA that also agree with this.”

Could you please point me to other professional resources? I am still facing resistance at administrator’s shop.

thanks

Gary

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See p 2 of 10:

http://spwfe.fpanet.org:10005/public/Unclassified%20Records/FPA%20Journa…

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