401K Rule of 55 – Date of Separation from Service
Taxpayer turns 55 in 2019. If his last day at work was December 31, 2018, but his last paycheck and 401k deferral occurred January 11, 2019, is the separation from service date for the Rule of 55 deemed to have occurred in 2018 or 2019?
Permalink Submitted by Alan - IRA critic on Mon, 2019-01-14 17:51
In such a situation, the separation date on the company books would be 12/31/2018 even if the employee was paid for accrued vacation or sick leave time in January, and therefore the taxpayer would have separated one day too soon for the penalty exception to apply. However, it is certainly worth checking with the employer to determine if the separation date might be in January.