For a disability code of 3, the distribution is not subject to the additional 10% tax, but the disability distribution is still included in taxable income.
Per IRS Publication 575 Pension and Annuity Income, page 5:
If you retired on disability, you generally must include in income any disability pension you receive under a plan that is paid for by your employer. You must report your taxable disability payments as wages on Form 1040, line 1; or Form 1040NR, line 8 until you reach minimum retirement age. Minimum retirement age generally is the age at which you can first receive a pension or annuity if you aren't disabled.
Caution! You may be entitled to a tax credit if you were permanently and totally disabled when you retired. For information on this credit, see Pub. 524.
Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. When you receive pension or annuity payments you are able to recover your cost or investment. Your cost is generally your net investment in the plan as of your annuity starting date. It doesn't include pre-tax contributions. For more information, see Cost (Investment in the Contract) and Taxation of Periodic Payments, later.
Report the payments on Form 1040, lines 4a and 4b; or on Form 1040NR, lines 17a and 17b.
To enter this distribution into the TaxAct program: