You still have to pay the tax on it. But you probably can avoid any early withdrawal penalty on it.
I was on Long Term Disability for over 12 months, but am back to work now. Would I still qualify for early withdrawal penalty?
{added 3-15-17} Please refer to the IRS definition of disability.
That could qualify as an exception to the penalty.
According to the IRS:
"There are several exceptions to the age 59 1/2 rule. Even if
you receive a distribution before you are age 591 2, you may not have to pay
the 10% additional tax if you are in one of the following situations.
You are totally and permanently disabled.
Disabled. If you become disabled before you reach age 59 1/2, any distributions from your traditional IRA (or 401k) because of your disability are not subject to the 10% additional tax. You are considered disabled if you can furnish proof that you cannot do any substantial gainful activity because of your physical or mental condition . A physician must determine that your condition can be expected to result in death or to be of long, continued, and indefinite duration."