A distribution for ESOP employer stock dividends is one of the Other Reasons that eliminate the penalty. Other early distribution penalty exemptions:
- You were older than 59 1/2 when you took out the money.
- You had to split your retirement with your spouse or former spouse under a qualified domestic relations order (QDRO). (This is not available for IRA accounts.)
- You had a qualified birth or adoption distribution. The amount permitted per qualifying child is $5,000 if made during the year the child is born or the legal adoption is finalized. You can distribute $10,000 for a joint return if each parent has a qualified retirement plan.
- You took the money out of a section 457 plan that you didn't originally roll over from another retirement plan that was a qualified plan.
- Money from an employer plan if you stopped working there by March 1, 1986, you have a written schedule for the payout of the money, and you get the payments according to the schedule.
- ESOP employer stock dividends
- Money from a deferred annuity contract that was invested in before August 14, 1982.
- Money from a deferred annuity contract for a personal injury settlement.
- Money from a deferred annuity contract purchased by your employer because the employer's retirement plan or retirement annuity plan terminated. The employer held the annuity contract until you stopped working there.
- Money from a single-purchase annuity that provides equal payments (at least once a year) that begin within one year from the annuity purchase.
- Money from a phased retirement annuity made to federal employees.
Check with your administrator and verify if your ESOP distribution qualifies.
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