Tax responsibilities

If I experienced a job termination, do I need to pay the 10% on my employer retirement plan withdrawal?

1 min read

It depends on your age. The 10% early-distribution penalty doesn’t apply to distributions made to an employee:

After separation from service
After reaching age 55
After reaching age 50, if you’re a qualified public safety employee. A public safety employee is a state or local employee who provides one of these:
- Police protection
- Firefighting services
- Emergency medical services

You qualify for this exception if you meet both of these conditions:

The distribution is made after you’ve separated from service with the employer maintaining the plan.
The separation from service occurs during or after the calendar year in which you reach the age requirement.

Other common exceptions include payments:

Received after reaching age 59 1/2
Allocable to investment in the contract before Aug. 14, 1982
Paid after your disability or death
Received as part of a series of substantially equal periodic payments over your life or life expectancy

To avoid the penalty, you should roll the distribution from the employer plan into an IRA. You must do this within 60 days of the distribution.

Also, the additional 10% tax doesn’t apply to distributions you take if both of these are true:

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