Virtually all employers impose severe restrictions on withdrawals of pre-tax or Roth contributions while a person remains employed with the company and is under the age of 59½.
- Many withdrawals permitted before the age of 59½, including withdrawals to pay expenses due to a hardship, are subject to an excise tax equal to ten percent of the amount distributed (on top of the ordinary income tax that has to be paid).
- Certain kinds of withdrawals (see this list) are not subject to this excise tax.
- Internal Revenue Code section 213 may allow a specific amount to be used by the worker for amounts paid during the taxable year for medical care.
- Account owners must begin making distributions from their accounts by April 1 of the calendar year after turning age 70½ or April 1 of the calendar year after retiring, whichever is later.
- The amount of distributions is based on life expectancy according to the relevant factors from the appropriate IRS tables. See these IRS Worksheets.