I received a lump sum early pension plan payment. I never contributed to this plan, do I have to pay the 10% early payment penalty?

[DianeW]

Yes if you are not receiving continued periodic payments, and you are below the retirement age of 59 1/2  (55 for a plan that is not an IRA) and not permanently disabled and you were separated from service for the employer over the plan.

For your convenience I have listed the exceptions below so that you could review them.  If you meet any exception the 10% tax may be removed.

There are certain exceptions to this additional 10% tax. The following six exceptions apply to distributions from any qualified retirement plan:

• Distributions made to your beneficiary or estate on or after your death.
• Distributions made because you are totally and permanently disabled.
• Distributions made as part of a series of substantially equal periodic payments over your life expectancy or the life expectancies of you and your designated beneficiary. If these distributions are from a qualified plan other than an IRA, you must separate from service with this employer before the payments begin for this exception to apply.
• Distributions to the extent you have deductible medical expenses that exceed 10% of your adjusted gross income (7.5% if you or your spouse is age 65 or over) whether or not you itemize your deductions for the year. The 7.5% limitation is effective only from January 1, 2013 to December 31, 2016 for individuals age 65 and older and their spouses. For more information on medical expenses, refer to Topic 502.
• Distributions made due to an IRS levy of the plan under section 6331.
• Distributions that are qualified reservist distributions. Generally, these are distributions made to individuals called to active duty for at least 180 days after September 11, 2001.

The following additional exceptions apply only to distributions from a qualified retirement plan other than an IRA:

1. Distributions made to you after you separated from service with your employer if the separation occurred in or after the year you reached age 55, or distributions made from a qualified governmental defined benefit plan if you were a qualified public safety employee (State or local government) who separated from service on or after you reached age 50.
2. Distributions made to an alternate payee under a qualified domestic relations order, and
3. Distributions of dividends from employee stock ownership plans.

[kjkraemer]

With regard to the statement above: "•Distributions that are qualified reservist distributions. Generally, these are distributions made to individuals called to active duty for at least 180 days after September 11, 2001." Does this only apply to reservists who take the early payout WHILE THEY ARE ON ACTIVE DUTY or is it a 'benefit' for soldiers who served and can be used later? For example, I was called to active duty in Feb of 2003 and served for more that 180 days. If I take an early distribution from my pension THIS YEAR, does this exception apply to me or do I still owe the 10% Penalty?

[dmertz]

From Internal Revenue Code section 72(t)(2)(G)(iii)(III):  [and] such distribution is made during the period beginning on the date of such order or call and ending at the close of the active duty period.

kjkraemer, given the circumstances that you indicated, you would not qualify for this exception since you are not still on active duty.

<a rel="nofollow" target="_blank" href="https://www.law.cornell.edu/uscode/text/26/72">https://www.law.cornell.edu/uscode/text/26/72</a>

[keithp1004]

I am 56 now was 55 at time of payment I am on SSI because of chronic renal failure. On dialysis.