I lost $30,000 due to a fraudulent transaction in my business.Is there anyway to get the 10% fee waived, from 403-b?It was a real hardship for us. Can the fee be waived?

[ColeenD3]

If you took an early distribution, there are a number of exceptions. If none of these pertain to you, unfortunately, you are required to pay the penalty.

There are certain exceptions to this additional 10% tax. The following six exceptions apply to distributions from any qualified retirement plan:

• Distributions made to your beneficiary or estate on or after your death.
• Distributions made because you're totally and permanently disabled.
• Distributions made as part of a series of substantially equal periodic payments over your life expectancy or the life expectancies of you and your designated beneficiary. If these distributions are from a qualified plan other than an IRA, you must separate from service with this employer before the payments begin for this exception to apply.
• Distributions to the extent you have deductible medical expenses that exceed 10% of your adjusted gross income (7.5% if you or your spouse is age 65 or over) whether or not you itemize your deductions for the year. The 7.5% limitation is effective only from January 1, 2013 to December 31, 2016 for individuals age 65 and older and their spouses. For more information on medical expenses, refer to Topic 502.
• Distributions made due to an IRS levy of the plan under section 6331.
• Distributions that are qualified reservist distributions. Generally, these are distributions made to individuals called to active duty for at least 180 days after September 11, 2001.

The following additional exceptions apply only to distributions from a qualified retirement plan other than an IRA:

1. Distributions made to you after you separated from service with your employer if the separation occurred in or after the year you reached age 55, or distributions made from a qualified governmental defined benefit plan if you were a qualified public safety employee (state or local government) who separated from service in or after the year you reached age 50.
2. Distributions made to an alternate payee under a qualified domestic relations order, and
3. Distributions of dividends from employee stock ownership plans.

[Carl]

The fact you may have lost money due to fraud is irrelevant when it comes to a withdrawal from your retirement account. Only withdrawals that meet specific and explicit conditions are eligible for a waiver of the 10% early withdrawal penalty. Using the withdrawn money for what turned out to be a fraudulent investment is not one of those exceptions unfortunately.