Code 3 is normally used for a disability pension when an employee leaves work because of a disability. Other financial institutors can use code 3, but do not in most circumstances, because they so not have the resources to verify and obtain the doctors records to prove the disability (and they have no reason to take on that responsibility) , so it is up to the taxpayer to claim it themselves on their tax return and prove it to the IRS if questioned.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
