Early Distributions From Section 401(a), 403(a), 403(b) Retirement Plan

Definition of "Early distributions from section 401(a), 403(a), 403(b) retirement plan"

Plan in which funds are withdrawn or income begins before the plan participant reaches age 59/2. An extra 10% early distribution tax on the taxable amount may have to be paid unless any one of the following conditions exist:

  1. distribution because the participant is disabled;
  2. participant is separated from job after the attainment of at least age 55 and the distribution is received at that time;
  3. participant terminates job and begins to receive annuity income consisting of a series of substantially equal payments at regular intervals (at least on an annual basis) over the lifetime, or life expectancy, or joint life expectancies of the participant and the participant's beneficiary;
  4. participant incurs medical expenses of at least 7/2% of adjusted gross income. If the participant dies before reaching age 59/2, the beneficiary (s) will not be subject to the payment of the 10% early distribution tax.

The availability of cash withdrawals and annuity income based on funds contributed as well as earnings on those funds under salary reduction plans beginning January 1,1989 is restricted by the Internal Revenue Code. Such withdrawals and receipt of income can only be made if the plan participant is at least age 59/4, terminates employment, becomes disabled, or dies.

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