Exceptions to the 10% Penalty

Distributions from annuities and qualified plans occurring prior to age 59-1/2 are generally subject to a 10% early distribution penalty. The IRS provides for exceptions to the penalty under Sec. 72(t) as follows:

• Death of the qualified plan owner.
• Disability of the qualified plan owner.
• To pay for qualified medical expenses.
• To purchase health insurance for certain unemployed individuals.
• To pay for certain first time home purchase expenses.
• To pay for certain education expenses of qualified individuals.
• To pay for an IRS levy.
• If the qualified plan owner follows special rules and receives "Substantially Equal Periodic Payments" over his or her life expectancy or the life expectancy of the qualified plan owner and his or her beneficiary under IRC Sec. 72(t).