Retirement Savings Plan Summary Plan Description
8.6 Income and Penalty Taxes
You do not pay income taxes on contributions made to your account (nor any earnings thereon) until you actually receive those amounts as benefit payments. There is generally a 10% federal penalty tax (and an additional 2 ½% state penalty tax) on distributions made to you before age 59 ½, though it will not apply to distributions made on account of tax-deductible medical expenses, disability or death, the birth or adoption of your child, or if you have separated from service during or after the year in which you attain age 55. Penalty taxes are avoided if your distribution is properly rolled over to another tax-qualified retirement vehicle. These rules are explained in more detail when you request a distribution.
Penalty Tax Exception for New Child. If you have recently had or adopted a new child, neither withholding taxes nor the 10% early distribution penalty tax will apply to up to $5,000 of your distribution made during the one-year period that begins on your new child's date of birth or legal adoption. To avoid taxable income, you can repay to the Plan, or some other eligible retirement plan to which you could make a rollover, any amount treated as subject to this birth/adoption exception.