Updated October 17, 2026. Quick answer: Exception code 01 on Form 5329 covers distributions from a qualified retirement plan, not an IRA, that you take after separating from service in or after the year you reach the required age. You enter the amount on line 2 and the number 01 beside it. The timing of the separation is what decides it: leaving the job in an earlier year does not qualify.
What code 01 means
The instructions define the exception in one sentence: “Qualified retirement plan distributions (doesn’t apply to IRAs) you received after separation from service when the separation from service occurs in or after the year you reach age 55”. For public safety workers and firefighters the same sentence adds “(age 50 for qualified public safety employees and private sector firefighters) or 25 years of service under the plan, whichever is earlier.”
Two words in that sentence do the work. First, the money must come from a qualified retirement plan; the instructions put “(doesn’t apply to IRAs)” in parentheses. Second, the key date is the separation from service, not the date of the withdrawal. Rules for people who keep working into their late fifties are on the rule of 55 page, and the plain-language overview is on the retire at 55 page.
The separation year rule
Publication 575 spells out the timing: “you must have separated from service in or after the year in which you reach age 55”. It then says “You can’t separate from service before that year.” The advice that follows is blunt: “Wait until you reach the applicable age, described above, and take a distribution.”
The publication gives an example of a person who missed it: “George separated from service from his employer at age 49.” It says “In the year he reached age 55, he took a distribution from his retirement plan.” The outcome: “Because he separated from service before he reached age 55, he didn’t meet the requirements for the exception”. The age at separation, not the age at withdrawal, is what the example turns on.
Who counts as a public safety employee
The lower age applies only to a defined group. Publication 575 says “You are a qualified public safety employee if you provided police protection, firefighting services, emergency medical services, services as a corrections officer, or as a forensic security employee providing for the care, custody, or control of forensic patients for a state or municipality.” It adds that “If you are a qualified public safety employee, distributions that are made from a governmental retirement plan may not be subject to the 10% additional tax on early distributions.” If you are not in that group, the age 55 version is the one that applies to you.
How to claim it on Form 5329
Code 01 is entered on line 2 of Part I. The instructions say “Enter on line 2 the amount that you can exclude.” “In the space provided, enter the applicable exception number”. Here that number is 01. Publication 575 adds that if the payer does not mark the exception on the 1099-R, “you must file Form 5329.” The line by line walk through is on Form 5329 lines 1 to 4, and the box 7 codes are listed on the 1099-R box 7 codes page.
If another exception also applies to the same year, “If more than one exception applies, enter 99.” See Form 5329 exception code 99.
Where it goes next
The line 2 amount comes off line 1. The form says “Amount subject to additional tax. Subtract line 2 from line 1”, and line 4 is “Additional tax. Enter 10% (0.10) of line 3.” That result goes where the form directs: “Include this amount on Schedule 2 (Form 1040), line 8”. Compare this rule with the IRA based one on the rule of 55 versus 72t page, and see the full list on early withdrawal penalty exceptions or in Form 5329 explained.
Edition and line numbers
This page reads the 2025 Form 5329 and its 2025 instructions, along with the 2025-returns edition of the Publication it cites, the current files irs.gov served on 2026-10-17. They are the forms for the tax year 2025 return, filed in 2026. Check the tax year printed on the form you are filling in and use the line numbers and exception numbers on that year’s form, because a different year’s form can number or word its lines and exceptions differently.
Common mistakes
- Using code 01 for an IRA. The instructions put “(doesn’t apply to IRAs)” right in the definition of the exception.
- Counting the year of the withdrawal instead of the year of leaving the job. Publication 575 says “You can’t separate from service before that year.”
- Assuming a public safety age applies to everyone. The lower age is for “qualified public safety employees and private sector firefighters” only.
Related: Rule of 55 (401(k) only), Rule of 55 versus 72t, Can you retire at 55, and 1099-R box 7 codes.
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Answer againSources
- Instructions for Form 5329 (2025): https://www.irs.gov/pub/irs-pdf/i5329.pdf
- Form 5329 (2025): https://www.irs.gov/pub/irs-pdf/f5329.pdf
- Publication 575, Pension and Annuity Income (for 2025 returns): https://www.irs.gov/pub/irs-pdf/p575.pdf
Read from the IRS documents linked above on October 17, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.