1099-R Information For Retirees Under Age 55 (5329) printable pdf download

1099-R Information For Retirees Under Age 55 (5329)

STATE OF NEW MEXICO

Educational Retirement Board

701 CAMINO DE LOS MARQUEZ

P.O. Box 26129

SANTA FE, NEW MEXICO 87502-0129

PHONE: (505) 827-

8030

FAX: (505) 827-1855

1099-R information for retirees under age 55

If you are a New Mexico Educational Retirement Board (NMERB) retiree who is under the age of 55,

please note: NMERB is required to use the code “1” on your 1099-R. NMERB previously coded these

1099 R’s with a “2”.

As you prepare your taxes, your tax preparer or tax software may inform you that the code “1” on your

1099-R will subject you to a 10 percent penalty tax because you have retired before reaching the age of

55.

However, as a NMERB retiree you should be exempt from this 10 percent penalty tax because you are

receiving the same amount of retirement benefit each month. This type of exemption is called a

“substantially equal periodic payment” or “SEPP.”

NMERB retirees under the age of 55, may apply for an exemption, from this 10 percent early distribution

penalty tax by completing and filing IRS form 5329 with the IRS. You may obtain this form from the IRS

website: https://

You may also review the instructions for form 5329, which are available on the IRS website:

https:// Page 3 of the instructions, for form 5329, states: “[t]he

additional tax on early distributions does not apply to the distributions described next.” See Figure 1,

page 3 (highlighted below). Page 4 of the instructions, states that Exception 2 includes, “[d]istributions

made as part of a series of substantially equal periodic payments ...” See Figure 1, page 4 (highlighted

below.) NMERB retirees may apply for this exemption.

In order to do this, on line 2, of Form 5329, you can enter the total amount of benefits you received last

year from NMERB as distributions “that are not subject to the additional tax.” See Figure 2, (highlighted

on page 2). Where Form 5329 states: “Enter the appropriate exception number from the instructions:”

you can enter the number “2” to indicate you fall under Exception 2 which is the exception for

substantially equal periodic payments.

Please note that any COLA adjustments made during the year to your monthly benefit will not disqualify

you from this tax exemption.

1099-R Information For Retirees Under Age 55 (5329)