Tax Treatment of Distributions Penalty on Early Distributions. You may also be liable for a 10% penalty tax on the money paid from your Account over and above the taxes you would normally pay. This tax is waived if the distribution is made:    after you reach age 59-1/2; when you leave employment with all Participating Employers after you attain age 55;    if you become disabled;    if you die and the distribution is paid to your beneficiary; to pay deductible medical expenses in accordance with Section 213 of the Internal Revenue Code; or    in accordance with a qualified domestic relations order. The 10% penalty tax will also be waived if you transfer your distribution directly to an IRA or to another qualified plan, Section 403(b) tax-sheltered annuity, governmental Section 457 Plan or IRA provided such plan permits the transfer.