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If you become eligible for a distribution from the Annuity Plan, you may defer payment of the 20% federal withholding tax (and an additional 10% tax penalty if received before age 59½) by rolling over the taxable portion of your distribution to an eligible retirement plan (if that plan accepts rollovers).

To be considered an eligible retirement plan, a plan must accept eligible rollover distributions and be:

  • An individual retirement account under Section 401(a) of the Internal Revenue Code;
  • An individual retirement annuity under Section 401(b) of the Internal Revenue Code;
  • A Roth individual retirement account under Section 408(A) of the Internal Revenue Code;
  • An annuity plan under Section 403(a) of the Internal Revenue Code;
  • A qualified trust under Section 401(a) of the Internal Revenue Code;
  • An annuity contract under Section 403(b) of the Internal Revenue Code; or
  • An eligible plan under Section 457(b) of the Internal Revenue Code that is maintained by a state, political subdivision of a state, or any agency of a state or political subdivision that agrees to separate account for amounts into such plan.

In addition, a non-spousal beneficiary may elect a direct rollover into an inherited IRA.

It is important to note that some individuals may not be eligible to make a rollover into a Roth IRA. It is your responsibility to determine if you are eligible to make a rollover into a Roth IRA. In addition, even if you are eligible to rollover into a Roth IRA, the rollover will be considered taxable income.

You should consult with a tax advisor before making any distribution decisions

The above also applies to surviving spouses and alternate payees under a Qualified Domestic Relations Order (QDRO).

You cannot rollover a payment if it is part of a series of equal (or almost equal) payments that are made at least once a year and that will last for:

  • Your lifetime (or your life expectancy); 
  • Your lifetime and your beneficiary’s lifetime (or life expectancies); or
  • A period of ten or more years.

In addition, you cannot rollover:

  • Any distribution that is required under Section 401(a)(9) of the Internal Revenue Code; 
  • A distribution to more than one retirement plan; or
  • Any portion of a distribution that is not included in your gross income.

You may elect to split the distribution between a direct rollover to a qualified plan and lump-sum payment to you. The amount not rolled over will be subject to the 20% federal withholding tax. If you are under age 59½, you may also be subject to an additional 10% tax penalty.

If the amount of your benefit is $5,000 or less, and you do not elect to make a rollover, you will receive a lump-sum payment, subject to the 20% federal withholding tax. If you are under age 59½, you may also be subject to an additional 10% tax penalty.

If your benefit exceeds $5,000, the benefit will remain in the Plan until you make an election. Beginning in the year you reach age 70½, a certain portion of your payment cannot be rolled over because it is a “required minimum payment” that must be paid to you.