Assuming that the plan really is a 401(k) plan and not an IRA-based plan (SEP or SIMPLE IRA, indicated by the IRA/SEP/SIMPLE box being marked on the Form 1099-R provided by the payer), a payer who knows her birthdate (as they should) and her separation date would typically use code 2 when they know that the distribution occurred after separation from service and that she separated from service in or after the year in which she reached age 55. However, even though they used code 1, she can claim the age 55 exception for the circumstances as TurboTaxCaro described.
