Before age 59 ½, any amounts distributed from a Traditional or Roth IRA to the individual for whom the plan is maintained are considered to be premature distributions. To the extent that these distributions are taxable, they are subject to an additional tax equal to 10 percent of the amount of the distribution that is includable in gross income during the tax year. This tax increases to 25 percent when distributions are taken from SIMPLE IRAs during the first two years of participation. However, there are several cases where the 10 percent penalty does not apply:

• Distributions made to a beneficiary, or the individual's estate, on or after the death of the individual
• Distributions attributable to a disability
• Distributions made for medical care, but only to the extent that they are allowable as a medical expense deduction (amounts in excess of 7.5 percent of the individual's AGI)
• Distributions made by unemployed individuals for the payment of health insurance premiums (the 7.5 percent floor does not have to be met if the individual has received unemployment compensation for at least 12 weeks and the withdrawal is made in the year that this compensation was received or in the year immediately following)
• Distributions made to pay "qualified higher education expenses" (tuition, fees, books, supplies and equipment required for the student to attend any eligible educational institution) during the taxable year for the taxpayer, the taxpayer's spouse, and the child or grandchild of the taxpayer or the taxpayer's spouse
• Distributions that are "qualified first-time homebuyer distributions"
• Distributions that are part of a series of substantially equal periodic payments made for the life or life expectancy of the individual or the joint lives or joint life expectancy of the individual and his or her designated beneficiary
• Distributions that are "qualified hurricane distributions" (these distributions may not exceed $100,000)
• Distributions that are "qualified reservist distributions" (those made to reserve members of the U.S. military called to active duty for 180 days or more at any time after September 11, 2001 and before the end of 2007)

For more information or to determine if you qualify for an exception, please contact your SS&G representative.