Particpant requests distribution prior to age 59 1/2. Plan pays out money....but for some reason participant isn't in receipt of money for 4 1/2 months at which time (surprise suprise) the participant has reached age 59 1/2.

Does the "year in which the even occurred" rule work for this scenario as it would in the separation from service at age 55?

Trust issued check using code "1" but told participant they are ok and no penalty applies...however, did not reissue a corrected 1099-R. I would think that if they were truly backing that interpretation they would reissue.

My guess is that the exception does apply for tax purposes as she did turn age 59 1/2 in year in which the distribution took place and the IRS is only concerned about where everything stands at 12/31. However, the plan processed an early distribution as they issued an in-service withdrawal of the participants account balance prior to the participant reaching age 59 1/2. Not seen any plan documents that say "in year...." so I would think a hard line approach is in order and 59 1/2 is 59 1/2 and not 59.475....

Can I get another opinion on this...am I being a bit stuffy in this interpretation?

The exception to the penalty, as listed in 72(t)(2)(A)(i) of the tax code states "made on or after the date on whhich the employee attains age 59 1/2".

I don't see any reference to the "year" of turning 59 1/2.

Hope this helps.

Bob