Distribution code 1D versus 2D

[Mighty-Dollar]

I have a variable annuity (I know -- Big mistake that I got into when I was young and stupid) and I'm on a SEPP program, which is supposed to waive the 10% early withdrawal penalty. I'm not yet age 59 1/2.

First of all, what do they mean by an "exception" with regard to the coding system below? Something that waives having to pay the 10% tax or waives having to pay ordinary income taxes?

1 – Early distribution (except Roth), no known exception
2 – Early distribution (except Roth), exception applies

Is it correct that the insurance company codes it as "1D"?
It's strange because back when I had this money in a Sun America annuity, they coded it as "2D". After I did a tax free 1035 exchange to Vanguard and continued the existing SEPP program, they started coding it as "1D". Strange.

[secondcor521]

The "exception" refers to an exception from the 10% penalty for distributions prior to 59.5.

"1D" is probably correct.  They don't know you're on a SEPP, even though you know and perhaps even told them.  I don't think it's a big deal...just file Form 5329 with the proper exception code (02) for any SEPP income.

The "D" apparently just refers to the fact that it's an annuity.  So you have two codes:  "1" and "D" and the just put both in the same box.