Save time with our cheat sheets, fact sheets, checklists & books!

July 31, 2023

The Age 55 Exception Rule for Early Distribution Penalty Exception


Generally, distributions that occur before the participant reaches age 59 ½ are subject to a 10% early distribution penalty, unless the participant qualifies for an exception. One of the exceptions is what is commonly referred to as the ‘age 55’ exception.

Under the age 55 exception, a distribution from a qualified plan or 403(b) plan is not subject to the 10% early distribution penalty, if the following applies:

  1. The participant separates from service with the plan sponsor in the year he or she reaches age 55 or later, and
  2. The distribution occurs after he or she separates from service with the plan sponsor

Note: Age 55 is reduced to age 50, if the distribution to a qualified public safety employee.

Qualified public safety employees.

For this purpose, a “qualified public safety employee”

  • any employee of a State or political subdivision of a State who provides:
    • police protection,
    • firefighting services,
    • emergency medical services, or
    • services as a corrections officer or
      • as a forensic security employee providing for the care, custody, and control of forensic patients for any area within the jurisdiction of such State or political subdivision, or
    • certain Federal law enforcement officer
    • certain Federal customs and border protection officer,
    • certain Federal firefighter,
    • certain air traffic controller,
    • certain nuclear materials courier
    • any member of the United States Capitol Police,
    • any member of the Supreme Court Police, or
    • any diplomatic security special agent of the Department of State.
    • Private sector firefighters who provide firefighting services,


  • The age 55 exception does not apply to IRAs. Therefore, a participant who is eligible for this exception loses the eligibility if the amount is rolled over to an IRA
  • The payor knows that you qualify for the age 55 exception, they are required to input Code 2 in Box-7 of IRS Form 1099-R, when reporting an early distribution that qualifies for the age 55 exception

Keep Learning

Annual Benefit Limit

Definition The annual benefit limit for defined benefit plans is the lesser of: A) 100% of the participant’s average compensation for his or her highest

Be among the first to know when

IRA Rules