I made an early withdrawal from a government retirement plan. My 1099-R shows a distribution code 1 - does this mean I don't have a 457 plan?

[sher]

I made an early withdrawal from a government retirement account. The 1099-R says it's Distribution Code 1, which causes TT to ask for the 10% penalty. So does this mean my retirement account is NOT a 457 plan? Or do I have to tell the IRS that it's 457 in the TT exception area? Shouldn't the 1099-R specify if it's a 457 account if it IS a 457 account?

[macuser_22]

A 1099-R does not tell you the type of plan.   I believe the way you handle this is to enter the 1099-R.   After the 1099-R entries screen that asks if you have another 1099-R to enter, press continue.  You should be asked if this is a non-qualified plan, which a 457 is.   Then you get a screen "These situations may lower your tax bill".   The last box "other" is where you enter the 457 distribution amount to remove the 10% penalty (click the blue "learn more" link for an explanation.

[dmertz]

A *governmental* 457(b) plan *is* a type of qualified retirement plan.  Distributions from a governmental 457(b) plan are eligible for all of the same types of exceptions to the early-distribution penalty as any qualified retirement plan.

A distribution from a governmental 457(b) can be subject to an early-distribution penalty or not, depending on the nature of the distribution.  If the distribution is from original contributions to a 457(b) plan or the earnings thereon, the distribution is not subject to an early-distribution penalty and the Form 1099-R should have code 2, not code 1.  However, if the distribution is from a subaccount in the 457(b) plan established by a rollover from an account that was not originally funded by contributions to a governmental 457(b) plan, the Form 1099-R should have code 1 and the distribution *is* subject to an early-distribution penalty.  In other words, the code in box 7 of the Form 1099-R normally determines whether or not the distribution is subject to an early-distribution penalty.

Most governmental 457(b) plans should be aware of the proper coding requirements since they are the ones required to maintain the separate subaccount for the rollover contributions that are subject to an early-distribution penalty.  However, if the distribution is reported with code 1 when it truly should have been reported with code 2, you can claim the Other Reason exception to the penalty as macuser_22 indicated.

[dmertz]

I've added a bit to my previous comment.

[macuser_22]

Thanks for correcting my incorrect answer.

[sher]

Thanks to both of you @dmertz and @macuser_22  - I will have to call and find out exactly what type of account this is. I am very grateful for your help. Thank you again!