118 
‘‘(4) DESIGNATED
BENEFICIARY.—For pur-
poses of this subsection, the term ‘designated bene-
ficiary’ means any individual designated a bene-
ficiary by the holder of the contract. 
‘‘(5) EXCEPTION FOR CERTAIN ANNUITY CON-
TRACTS.—This subsection shall not apply to any an-
nuity contract— 
‘‘(A) which is provided— 
‘‘(i) under a plan described in section 
401(a) which includes a trust exempt from 
tax under section 501, or 
‘‘(ii) under a plan described in section 
403(a), 
‘‘(B) which is described in section 403(b), 
‘‘(C) which is an individual retirement an-
nuity or provided under an individual retire-
ment account or annuity, or 
‘‘(D) which is a qualified funding asset. 
‘‘(6) SPECIAL RULE WHERE HOLDER IS COR-
PORATION OR OTHER NON-INDIVIDUAL.— 
‘‘(A) IN GENERAL.—For purposes of this 
subsection, if the holder of the contract is not 
an individual, the primary annuitant shall be 
treated as the holder of the contract.
119 
‘‘(B) PRIMARY ANNUITANT.—For purposes 
of subparagraph (A), the term ‘primary annu-
itant’ means the individual, the events in the 
life of whom are of primary importance in af-
fecting the timing or amount of the payout 
under the contract. 
‘‘(7) TREATMENT OF CHANGES IN PRIMARY AN-
NUITANT WHERE HOLDER OF CONTRACT IS NOT AN 
INDIVIDUAL.—For purposes of this subsection, in 
the case of a holder of an annuity contract which is 
not an individual, if there is a change in a primary 
annuitant (as defined in paragraph (6)(B)), such 
change shall be treated as the death of the holder. 
‘‘(r) 10-PERCENT ADDITIONAL TAX ON EARLY DIS-
TRIBUTIONS FROM QUALIFIED RETIREMENT PLANS.— 
‘‘(1) IMPOSITION OF ADDITIONAL TAX.—If any 
taxpayer receives any amount from a qualified re-
tirement plan (as defined in section 4974(c)), the 
taxpayer’s tax under this chapter for the taxable 
year in which such amount is received shall be in-
creased by an amount equal to 10 percent of the 
portion of such amount which is includible in gross 
income. 
‘‘(2) SUBSECTION NOT TO APPLY TO CERTAIN 
DISTRIBUTIONS.—Except as provided in paragraphs
120 
(3) and (4), paragraph (1) shall not apply to any of 
the following distributions: 
‘‘(A) IN
GENERAL.—Distributions which 
are— 
‘‘(i) made on or after the date on 
which the employee attains age 591⁄2, 
‘‘(ii) made to a beneficiary (or to the 
estate of the employee) on or after the 
death of the employee, 
‘‘(iii) attributable to the employee’s 
being disabled within the meaning of sub-
section 72(m)(7) of the Internal Revenue 
Code of 1986, 
‘‘(iv) part of a series of substantially 
equal periodic payments (not less fre-
quently than annually) made for the life 
(or life expectancy) of the employee or the 
joint lives (or joint life expectancies) of 
such employee and his designated bene-
ficiary, 
‘‘(v) made to an employee after sepa-
ration from service after attainment of age 
55,
121 
‘‘(vi) dividends paid with respect to 
stock of a corporation which are described 
in section 404(k), or 
‘‘(vii) made from a Roth IRA (other 
than a distribution described in section 
30(d)(2)). 
‘‘(B) MEDICAL
EXPENSES.—Distributions 
made to the employee (other than distributions 
described in subparagraph (A), (C), or (D)) to 
the extent such distributions do not exceed the 
amount allowable as a deduction under section 
31 to the employee for amounts paid during the 
taxable year for medical care (determined with-
out regard to whether the employee itemizes de-
ductions for such taxable year). 
‘‘(C) PAYMENTS
TO
ALTERNATE
PAYEES 
PURSUANT
TO
QUALIFIED
DOMESTIC
RELA-
TIONS ORDERS.—Any distribution to an alter-
nate payee pursuant to a qualified domestic re-
lations order (within the meaning of section 
414(p)(1)). 
‘‘(D) DISTRIBUTIONS TO UNEMPLOYED IN-
DIVIDUALS
FOR
HEALTH
INSURANCE
PRE-
MIUMS.—
122 
‘‘(i) IN GENERAL.—Distributions from 
an individual retirement plan to an indi-
vidual after separation from employment— 
‘‘(I) if such individual has re-
ceived unemployment compensation 
for 12 consecutive weeks under any 
Federal or State unemployment com-
pensation law by reason of such sepa-
ration, 
‘‘(II) if such distributions are 
made during any taxable year during 
which such unemployment compensa-
tion is paid or the succeeding taxable 
year, and 
‘‘(III) to the extent such distribu-
tions do not exceed the amount paid 
during the taxable year for insurance 
described in section 213(d)(1)(D) of 
the Internal Revenue Code of 1986 
with respect to the individual and the 
individual’s spouse and dependents. 
‘‘(ii) DISTRIBUTIONS
AFTER
REEM-
PLOYMENT.—Clause (i) shall not apply to 
any distribution made after the individual 
has been employed for at least 60 days