COBRA and 401(k) acct for terminated ee

[Guest Carol the Writer]

One of our clients has an employee who is on layoff. He has vested accounts in both the 401(k) plan and the prevailing wage pension of the employer. Now the employee wants exercise his COBRA option to continue his health insurance AND he wants to take the COBRA premiums directly out of his former company's retirement plan accounts without paying a 10% premature distribution tax penalty.

Can he do this? Can the COBRA premium be totally income-tax and penalty-tax free?

Thanks in advance.

Carol Caruthers, MSPA, EA