Actually, TurboTax has it mostly correct. I have a letter ruling from the MS Department of Revenue verifying it. Form 1099-R, code 2 is considered an early distribution and therefore is taxable. There's two exceptions:
1. All PERS retirement distributions are non-taxable, no matter the age or code.
2. Early retirement distributions where the receipient has met the 'full years of service' requirement of the plan can be excluded from income.
This means many/some 1099s with Code 2 will be taxable income.
