Early Distributions Due to Death or Disability

Q. Are distributions due to a participant dying or becoming disabled subject to ordinary income tax, but not subject to the 10% premature distribution penalty?

A. Yes. In the event of death, the exemption from that penalty applies to cash distributions to beneficiaries and distributions made from a beneficiary IRA. It does not apply to accounts rolled over to a surviving spouse’s IRA in his or her own name (non-beneficiary IRA).