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qualified retirement plan includes both a section 401(k) plan and
an individual retirement account or individual retirement
annuity. See secs. 72(t)(1), 401(a), (k)(1), 4974(c)(1), (4) and
(5). The 10-percent additional tax imposed on early
distributions from qualified retirement plans does not apply to
distributions from an individual retirement plan used for higher
education expenses of the taxpayer for the taxable year. Sec.
72(t)(2)(E). The term “individual retirement plan” is defined as
an individual retirement account or individual retirement annuity
(commonly referred to as IRAs). Sec. 7701(a)(37). Retirement
plans qualified under section 403(b), as in this case, are not
included in the definition of “individual retirement plan” under
section 7701(a)(37).
Congress intended the exception of section 72(t)(2)(E) to
apply only to distributions from “individual retirement plans”;
i.e., IRAs, and not to all qualified retirement plans. See secs.
4974(c)(4) and (5) and 7701(a)(37); Taxpayer Relief Act of 1997,
Pub. L. 105-34, sec. 203(a), 111 Stat. 809. This is evident in
the report of the Committee on the Budget, which states:
Penalty free IRA withdrawals for education
expenses--The bill provides that individuals may make
penalty-free withdrawals from their IRAs to pay for the
undergraduate and graduate higher education expenses of
themselves, their spouses, their children and
grandchildren or the children or grandchildren of their
spouses. [Emphasis added.]
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Last modified: May 25, 2011