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Taxation of Withdrawals and Final Payouts
In general, your before-tax contributions, Company matching contributions, and investment earnings on all types of contributions other than Roth contributions are taxable when you receive them. The actual tax treatment will depend on your age at the time of receipt. You can find more information about tax treatment of Savings Program distributions in the "Special Tax Information Notice," which is included with your quarterly statement and is also available online or by calling Participant Services.
Before Age 59-1 /2
If your payment is received before age 59-1/2, you will pay a 10% additional tax in addition to ordinary income tax on the taxable portion of the payment, including a hardship withdrawal unless you qualify for one of the exceptions to this 10% penalty listed in the "Special Tax Information Notice." You can avoid the income tax and additional tax if you rollover the taxable portion of your payment into an IRA or other eligible retirement plan within the time period permitted by law. Beneficiaries are never subject to the 10% tax penalty, regardless of your age at death. At Age 59-1 /2 or Later
If you make a withdrawal or receive a Savings Program distribution after age 59 -1/2, you will not have to pay the 10% penalty. If you were at least age 50 on January 1, 1986, the law generally makes 10-year forward averaging (based on 1986 tax rates) available as an alternative, as well as special capital gains treatment, provided you were a participant before 1974. To be sure you are using your benefits to their full advantage, you should check with a tax advisor regarding the specific requirements for using these and other forms of favorable treatment that may apply to your payout. Neither the Benefit Plans Office nor Participant Services can give you tax advice. Roth Contributions
Special rules apply to payments of Roth contributions and earning on those contributions. Payments of the Roth contributions are not subject to federal income tax. Earnings on your Roth contributions will be subject to federal income tax unless the distribution occurs at least five years after you make your first Roth contribution or rollover Roth contributions from a former employer and the distribution is made after you turn 59 ½, upon your death, upon your disability. Rollovers and Withholding
Withdrawals and lump sum distributions of your before-tax contributions and Company matching contributions, your after-tax contributions, or your Roth contributions as adjusted for investment earnings and losses, can be rolled over to an IRA or other eligible retirement plan. Required minimum distributions to employees who have terminated and reached age 70-1/2 or retired from the Company after age 70-1/2, and distributions paid out in installments are not eligible for such a rollover. You can roll over all or a portion of your eligible plan payouts either directly or indirectly to an IRA or other eligible retirement plan. With a direct rollover, The Recordkeeper will send you a check payable to the trustee of the eligible IRA or plan you designate. If you elect a direct rollover, no federal tax withholding will apply to your rollover amount. The portion that is not rolled over will be subject to mandatory 20% tax withholding. If you want to roll over your eligible payout yourself - an indirect rollover - there are some important facts to keep in mind:
If your payment is received before age 59-1/2, you will pay a 10% additional tax in addition to ordinary income tax on the taxable portion of the payment, including a hardship withdrawal unless you qualify for one of the exceptions to this 10% penalty listed in the "Special Tax Information Notice." You can avoid the income tax and additional tax if you rollover the taxable portion of your payment into an IRA or other eligible retirement plan within the time period permitted by law. Beneficiaries are never subject to the 10% tax penalty, regardless of your age at death. At Age 59-1 /2 or Later
If you make a withdrawal or receive a Savings Program distribution after age 59 -1/2, you will not have to pay the 10% penalty. If you were at least age 50 on January 1, 1986, the law generally makes 10-year forward averaging (based on 1986 tax rates) available as an alternative, as well as special capital gains treatment, provided you were a participant before 1974. To be sure you are using your benefits to their full advantage, you should check with a tax advisor regarding the specific requirements for using these and other forms of favorable treatment that may apply to your payout. Neither the Benefit Plans Office nor Participant Services can give you tax advice. Roth Contributions
Special rules apply to payments of Roth contributions and earning on those contributions. Payments of the Roth contributions are not subject to federal income tax. Earnings on your Roth contributions will be subject to federal income tax unless the distribution occurs at least five years after you make your first Roth contribution or rollover Roth contributions from a former employer and the distribution is made after you turn 59 ½, upon your death, upon your disability. Rollovers and Withholding
Withdrawals and lump sum distributions of your before-tax contributions and Company matching contributions, your after-tax contributions, or your Roth contributions as adjusted for investment earnings and losses, can be rolled over to an IRA or other eligible retirement plan. Required minimum distributions to employees who have terminated and reached age 70-1/2 or retired from the Company after age 70-1/2, and distributions paid out in installments are not eligible for such a rollover. You can roll over all or a portion of your eligible plan payouts either directly or indirectly to an IRA or other eligible retirement plan. With a direct rollover, The Recordkeeper will send you a check payable to the trustee of the eligible IRA or plan you designate. If you elect a direct rollover, no federal tax withholding will apply to your rollover amount. The portion that is not rolled over will be subject to mandatory 20% tax withholding. If you want to roll over your eligible payout yourself - an indirect rollover - there are some important facts to keep in mind:
- Mandatory 20% tax withholding will apply to the taxable portion of the distribution when the payout is made to you.
- Your rollover must be made within 60 days of the day you receive your payout.
- Any portion of the taxable part of your payout not rolled over will be subject to income and penalty taxes (if applicable).