Under current law, a taxpayer who receives a distribution from a qualified retirement plan prior to age 591/2, death, or disability is generally subject to a 10-percent additional income tax under § 72(t) unless an exception applies. Pursuant to amendments made by the Pension Protection Act of 2006 (PPA ’06), Pub. L. No. 109-280, § 72(t)(2)(G) of the Code provides that the 10-percent additional income tax does not apply to a qualified reservist distribution.
A qualified reservist distribution is defined under § 72(t)(2)(G)(iii) as a distribution from an IRA or a distribution attributable to elective deferrals under a § 401(k) or 403(b) plan (or a plan described in § 501(c)(18)) to a member of the reserves who has been ordered or called to active duty for a period exceeding 179 days or for an indefinite period. A qualified reservist distribution can be made without regard to otherwise applicable restrictions under §§ 401(k) and 403(b) on in-service distributions of amounts attributable to elective deferrals. In addition, during the two-year period beginning on the day after the end of the individual’s active duty service, an individual who receives a qualified reservist distribution may make contributions to an IRA in an amount up to the amount of the qualified reservist distribution, which are not subject to the otherwise applicable limits on IRA contributions and are not deductible.