Profit Sharing Plan, participant is 100% vested and Age 57. He is no longer an employee and is on disability......does he get special tax treatment because of disability. He will be taking a lump sum distribuiton....is he still penalized 20%??

Thanks!

Ok, the participant terminated in 1/03, he became disabled in 11/03. He is now receiving social security and disability benefits from the gov't. However, if he now takes a distribution from his profit sharing account, does that affect his social security is currently receiving from the gov't?????? help, this is so confusing!!!

Thanks.

1. The additional tax for early distributions is 10%, not 20%
2. The additional tax does not apply to distributions from plans where you worked and terminated at age 55 and up. IRC 72(t)(2)(A)(iv). So the disability issue [72(t)(2)(A)(iii) doesn't even have to be explored for this person.
3. The distribution is taxable income and rollover-eligible, so 20% withholding applies if not rolled over.