Ask TaxMama ... Laid Off 401ks Continued ... May 17, 2002

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Laid Off 401ks Continued

OK, I've put off getting my eyes checked way too long. Either that, or I have to turn the light on while I'm staring at the screen in my dark little corner. Gee, I'd better schedule it this summer!

We talked about drawing money from 401ks while you're unemployed in Issue #154

<THANKS to George for supplying the correct the exception number to use>

Dear TaxMama:

In your article about paying health insurance from 401-k proceeds may need some clarification.

Form 5329 states two exceptions as follows:

"05 Distributions to the extent you have deductible medical expenses that can be claimed on line 4 of Schedule A"

"07 IRA distributions made to unemployed individuals for health insurance premiums."

A person using 401-k distributions can only use exception 05 and must reduce the health insurance premiums claimed by 7.5% of AGI.

You mentioned exception 06, which is a divorce order.

George Kaiser
Norm Processor
International Survey Research, LLC
E-mail: <mailto:george.kaiser@isrsurveys.com>

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