PORTFOLIO

Distributions from Qualified Plans — Taxation and Qualification (Portfolio 370)

Tax Management Portfolio, Distributions from Qualified Plans — Taxation and Qualification, No. 370-4th, discusses the income, excise and withholding tax issues relating to various types of distributions made from qualified retirement plans.

Price: $400 Print

GET MORE WITH THE FULL PORTFOLIO LIBRARY

This Portfolio is part of the U.S. Income Portfolios Library, a comprehensive resource including 200+ federal tax Portfolios, practice tools, primary sources and timely news.

FREE TRIAL

DESCRIPTION

Tax Management Portfolio, Distributions from Qualified Plans — Taxation and Qualification, No. 370-4th, discusses the income, excise and withholding tax issues relating to various types of distributions made from qualified retirement plans.
Part I of this Portfolio provides a brief overview of the taxation of qualified plan distributions. Part II distinguishes between the lump-sum and annuity and installment forms of distribution and discusses the treatment of distributions of property in-kind. Part III discusses the income tax treatment of various types of distributions, including plan loans, hardship withdrawals and distributions made pursuant to qualified domestic relations orders (QDROs), that can be made during the participant's active employment. Part IV examines the income tax treatment of distributions made at termination of employment. Part V discusses the income tax treatment of distributions made in the event of termination of the plan. Part VI describes certain tax treatment that occurs in the event of plan disqualification. Part VII discusses the treatment of distributions that occur as a result of a merger or acquisition involving the plan sponsor. Part VIII analyzes methods of deferring income tax on a qualified plan distribution, such as direct plan transfers and tax-free rollovers. Part IX examines the §401(a)(9) required minimum distribution rules. Part X describes the types of distributions and amount of such distributions subject to income tax withholding under §3405, specific issues regarding federal estate taxation of qualified plan distributions, the additional income tax on early distributions under §72(t), and the §4974 excise tax on the failure to make required minimum distributions.


Buy Distributions from Qualified Plans — Taxation and Qualification (Portfolio 370) now


AUTHORS

LAWRENCE JENAB ESQ.
Larry Jenab is a partner in Spencer Fane's Employee Benefits and ERISA Litigation groups. His practice emphasizes ERISA and other aspects of employee benefits law, including tax and fiduciary matters. He also has experience successfully litigating complex ERISA preemption and standing issues.

Before joining Spencer Fane, Larry served as Lecturer in Law at the University of Kansas, where he taught Civil Procedure. Larry also worked for the Japanese Ministry of Education, serving in Miyazaki Prefecture, where he taught high school English. Before his legal career, Larry attended the Musicians Institute in Hollywood, CA, where he studied guitar performance.

Larry's recent lecture topics include in-plan Roth conversions, employee wellness programs, ERISA health-plan reimbursement actions, cafeteria plans, and the correction of retirement plan qualification failures under the IRS's Employee Plans Compliance Resolution System ("EPCRS").

TABLE OF CONTENTS

Detailed Analysis

I. Introduction

A. Scope of Discussion

B. Form of Distribution

C. In-Service Distributions

D. Distributions at Termination of Service

E. Distributions Upon Plan Termination

F. Tax Consequences Upon Plan Disqualification

G. Distributions Upon Merger/Acquisition of Plan Sponsor

H. Tax-Free Rollovers

I. Required Plan Distributions

J. Special Taxation Rules

II. Form of Distribution

Introductory Material

A. Lump-Sum Distributions

1. Statutory Development

a. Pre-ERISA Law

b. ERISA Changes

c. 1986 Tax Reform Act Limitations

d. Repeal of Five-Year Forward Averaging Under 1996 Act

2. Definitional Requirements

a. One Taxable Year

b. Minimum Period of Plan Participation

c. Balance to the Credit of the Employee

d. Separation from Service

(1) Background

(2) General Rules

e. Age 5912

f. Death or Disability

g. Aggregation of Trusts and Plans

3. Forward Averaging

a. Computation of Tax

b. Allocation Between Capital Gains and Ordinary Income

c. Computation of the Separate Tax on a Cash Lump-Sum Distribution - Ordinary Method

d. Computation of the Separate Tax on a Lump-Sum Distribution Which Includes an Annuity Contract

e. Multiple Lump-Sum Distributions Former Six-Year Look-back Rule

4. Lump-Sum Election

5. Alternatives to Lump-Sum Treatment

a. Tax-Free Rollover

b. Estate Tax Considerations

6. Application of Lump-Sum Rules to Self-Employed Individuals and Key Employees

B. Annuity and Installment Payment Distributions

1. Tax Treatment

2. Background

3. Investment in the Contract

a. Single Contract

b. Determination of Contributions Paid

c. Adjustments for Refund Feature

d. Special Rule for Alternate Payees

e. Nonresident Aliens

4. Three-Year Rule

5. Exclusion Ratio

a. In General

(1) Annuity Starting Dates After July 1, 1986 and Before November 19, 1996

(a) General Rule

(b) Simplified General Rule

(2) Annuity Starting Dates After November 18, 1996

(a) Annuity Starting Dates After November 18, 1996 and Before January 1, 1998

(b) Annuity Starting Dates After December 31, 1997

(c) Other Rules Applicable to Annuity Payments After November 18, 1996

(d) Transition Rule for Annuity Starting Dates After November 18, 1996 and Before January 1, 1997

b. Refund Feature

6. Special Rules

a. Annuity Payments Continuing Beyond or Ceasing Before Anticipated Life Expectancy

b. Pre-Annuity Starting Date Withdrawals

c. Correction of Overpayment of Benefits

7. Exceptions to Exclusion Ratio Rule

a. Non-Annuity Payments Received After Annuity Starting Date

b. Dividends

8. Penalty Tax on Distributions to 5% Owners

C. Distributions of Property In-Kind - Employer Securities

1. Unrealized Appreciation on Employer Securities

a. In General

b. Cost or Other Basis to Trustee

c. Securities of the Employer Corporation

d. Determination of Net Unrealized Appreciation

e. Distribution of Employer Securities Having a Fair Market Value Less Than Investment in the Contract

2. Annuity and Insurance Contracts 60-Day Conversion Period

3. Series EE Bonds Purchased with Employee Contributions

D. Application of § 411(d)(6)

1. General Rule

2. Amendments to Eliminate Optional Forms of Benefits

3. Voluntary Direct Transfers Between Plans

a. Direct Rollover

b. Distributable Event Transfer

c. Transaction or Employment Change Transfer

4. In-Kind Distribution

5. Plan Drafting Options When Preparing GUST Amendments

6. Employee Communication When Eliminating Optional Forms of Benefit

7. Exception for Direct Transfers After 2001

III. In-Service Distributions

A. In General

B. Distribution of Pre-Tax Contributions

1. Attainment of a Stated Age

a. Withdrawals Upon Attainment of Age 591/2

b. Distributions Upon Attainment of Age 701/2

c. Phased Retirement

2. Taxation of Distribution of Pre-Tax Contributions

C. Distribution of After-Tax Contributions

1. Taxation of Withdrawal of After-Tax Contributions

2. Separate Contracts

3. Additional Income Tax

4. Grandfather Rule Regarding Pre-1987 Employee Contributions

5. Interaction of Separate Contract Rules and Grandfather Rule Regarding Pre-1987 Contributions

6. Qualified Roth § 401(k) Contribution Programs

a. Requirements and Contribution Limits

b. Qualified Distributions

c. Excess Contributions and Deferrals

d. Investment in the Contract

e. Rollovers

f. Plan Loan and Aggregation Rules

g. Reporting and Recordkeeping Requirements

D. Loans

1. Background

2. Prohibited Transaction Exemption for Participant Plan Loans

a. Plan Loan Exemption Requirements

(1) Loans Must Be Available on a Reasonably Equivalent Basis

(2) Loans Must Not Be Made Available to Highly Compensated Employees in an Amount Greater Than Available to Other Participants

(3) Loans Must Be Made in Accordance with Specific Provisions of Plan

(4) Loan Must Bear a Reasonable Rate of Interest

(5) Loan Must Be Adequately Secured

3. Tax Treatment of Plan Loans

a. Exception to Treatment as Plan Distribution

(1) Loan Must Be Evidenced by a Legally Enforceable Agreement in Writing

(2) Amount of Loan May Not Exceed Statutory Limits

(3) Term of Loan

(4) Level Amortization

b. Deemed Distribution Upon Failure to Satisfy Exception Requirements

c. Repayment of Loan After Deemed Distribution

d. Deduction of Interest Paid on Plan Loans

e. Reporting and Withholding Requirements

f. Loans Made Under a Residential Mortgage Investment Program

g. Effective Date of § 72(p)

4. Repayment of Plan Loans After Participant's Bankruptcy

E. Hardship Withdrawals

1. Requirements for a Hardship Withdrawal

a. Immediate and Heavy Financial Need

(1) In General

(2) Safe Harbor Provision

b. Distribution Necessary to Satisfy Financial Need

(1) In General

(2) Safe Harbor Provision

2. Distributable Amount in Event of a Hardship

a. Amounts Attributable to a Cash or Deferred Arrangement Under § 401(k)

b. Amounts Attributed to Employer Matching and Nonelective Contributions

3. Taxation of Hardship Withdrawals

4. Early Withdrawal Penalty Imposed on Hardship Withdrawals

F. Qualified Domestic Relations Orders

1. In General

2. Substantive Requirements of a QDRO

a. Definition of a QDRO

b. QDRO Must Specify Certain Facts

c. QDRO May Not Alter Amount or Form of Benefits

d. Payments Made After Earliest Retirement Age

e. Treatment of Former Spouse as Survivor Spouse for Survivor Benefits

3. Plan Administration of QDROs

a. Determination of Qualified Status by Plan Administrator

b. Written Plan Procedures Regarding QDROs

c. Protection and Preservation of Plan Assets During Consideration of an Order

d. Notice of Administrator's Determination Regarding QDRO

4. Plan Benefit Forms-Certain Issues Regarding Alternate Payees

a. Loans to Alternate Payee

b. Spousal Waiver under QDRO

5. QDROs Dividing Benefits Payable by the PBGC

6. Drafting QDROs

a. "Shared Payment" Approach

b. "Separate Interest" Approach

c. Selection of Approach to Divide Plan Benefits

d. Survivor Benefits Addressed in QDRO

7. Taxation of QDROs

a. Spouse or Former Spouse as Alternate Payee

b. Nonspousal Alternate Payee

c. Early Distribution Additional Tax

G. Offset of Participant's Benefits

1. Permissible Offset of Benefits

2. Tax Effect of Offset of Participant's Benefits

3. Offset of Tax Liens in Bankruptcy

H. Correction of Excess Contributions

1. Contribution Limitations - In General

2. Excess Elective Deferrals

a. Methods for Correcting Excess Deferral

(1) Corrective Distribution on or Before April 15 After Taxable Year End and Applicable Tax Treatment

(2) Corrective Distribution During Taxable Year and Applicable Tax Treatment

(3) Corrective Distribution After April 15 Following Taxable Year End and Applicable Tax Treatment

(4) Partial Corrective Distribution and Applicable Tax Treatment

b. Income Allocated to Excess Deferrals

c. Treatment as Employer Contributions

d. Coordination with Distribution or Recharacterization of Excess Contributions

3. Excess Contributions

a. Methods for Correcting Excess Contributions

(1) QNEC and/or QMAC Contribution as Correction

(2) Distribution of Excess Contributions as Correction and Applicable Tax Treatment

(3) Recharacterization of Excess Contributions as Correction and Applicable Tax Treatment

(4) Partial Correction of Excess Contributions and Applicable Tax Treatment

b. Determination of Amount of Excess Contributions

c. Income Allocated to Distributed Excess Contributions

d. Treatment as Employer Contributions

e. Coordination with Distribution of Excess Deferrals

f. Treatment of Matching Contributions Forfeited by Reason of Excess Deferral or Contribution

4. Excess Aggregate Contributions

a. Methods for Correcting Excess Aggregate Contributions

(1) QNEC and/or Elective Contribution as Correction

(2) Distribution of Excess Aggregate Contributions as Correction and Applicable Tax Treatment

(3) Forfeiture of Matching Contributions as Correction

(4) Partial Correction of Excess Aggregate Contributions

b. Determination of Amount of Excess Aggregate Contributions

c. Income Allocated to Distributed Excess Aggregate Contributions

d. Treatment as Employer Contributions

e. Coordination with Excess Deferrals and Excess Contributions

5. Excess Annual Additions

a. Methods for Correcting Excess Annual Additions

(1) Distribution of Excess Annual Additions and Applicable Tax Treatment

(2) Distribution of Elective Deferrals

(3) Distribution of Employee Contributions

b. Treatment for Purposes of Other Contribution Limitations

I. Life Insurance

1. Coverage

a. "Incidental Benefit" Requirement

(1) "100 to 1" Test

(2) 25%-50% Test

(3) 1/3 -2/3 Test

b. Tax Consequences for Life Insurance Coverage

(1) Table 2001

(2) Group Term Life Insurance

(3) Trust as Beneficiary

(4) "Carve-Out" of Insurance Benefit

(5) Transfer of Life Insurance Contract to Qualified Plan

2. Distribution of Life Insurance Contract

a. General Rules

b. Springing Cash Value Life Insurance

3. Tax Treatment of Life Insurance Proceeds

J. Accident and Health Benefits

1. General Restrictions

a. Profit-Sharing Plans

b. Pension Plans

2. Taxation of Accident or Health Benefit Coverage

a. Profit-Sharing Plans

b. Pension Plans

3. Taxation of Accident and Health Insurance Proceeds

a. Accident or Health Benefits Attributable to Employee Contributions

b. Accident or Health Benefits Attributable to Employer Contributions

c. Self-Employed Individuals

K. ESOP Dividends

L. Phased Retirement Arrangements

IV. Distributions at Termination of Service

Introductory Material

A. Distribution in Event of Termination of Employment

1. Timing of Distribution from Plan

2. Form of Distribution: Lump-sum versus Annuity

3. Participant Election to Defer Benefit

4. Constructive Receipt of Plan Benefit

5. Exceptions to Constructive Receipt

6. Involuntary Cash-Out of Vested Benefit

B. Distribution in Event of Disability

1. Form of Distribution: Lump-sum versus Annuity

2. Application of the Exception to Additional Income Tax on Early Withdrawals in Event of Disability

a. Definition of Disability

b. Definition of "Attributable" Unclear

c. Disability May Allow Distribution from an IRA

3. Disability: Distributable Event for § 401(k) and Other Qualified Plans

4. High Burden of Proving Disability

5. Application of Proper Definition of "Disability"

C. Distribution in Event of Retirement

1. Qualification Requirements as Applied to Distributions Upon Retirement

a. "Severance from Employment" Standard in § 401(a)

b. Separation from Service Standard in § § 72(t), 401(k), 402 and 409(d)

2. Early Retirement

a. Retirement Prior to a Participant Reaching Age 55

b. Retirement After a Participant Reaches Age 55 but Before Age 591/2

c. Retirement After Reaching Age 591/2 but Before Age 701/2

d. Retirement After Reaching Age 701/2

D. Distribution in Event of Death

1. Death Benefit Exclusion

2. Exclusion of Life Insurance Proceeds

3. Survivor Annuity Requirements

a. In General

b. Plans to Which the Survivor Annuity Requirements Apply

c. Benefits to Which the Survivor Annuity Rules Apply

d. Restriction on Distributions Without Participant's Consent

4. Qualified Joint and Survivor Annuities

a. Nature and Scope

b. Right to Waive the QJSA Form of Benefit

c. Written Explanation

d. Spousal Consent to Waiver

e. Other Exceptions to the Survivor Annuity Rules

5. Qualified Pre-Retirement Survivor Annuities

a. Nature and Scope

b. Right to Waive the QPSA Form of Benefit/Spousal Consent Requirement

c. Written Explanation

d. Other Exceptions to QPSA Rules

6. Involuntary Cash-Outs of Vested Benefits

7. Federal Estate Taxation of Qualified Plan Distributions

8. Disclaimer of Plan Benefits

9. Military Service

V. Distributions Upon Plan Termination

A. Law Prior to Unemployment Compensation Amendments of 1992

B. Unemployment Compensation Amendments of 1992

C. Constructive Rollover from Terminated Plan

D. Distribution from § 401(k) Plan Upon Plan Termination

1. Background

2. Sale of a Subsidiary or Substantially All Assets of a Business

3. Specific Requirements Under § § 401(k)(10), 402(e)(4) and Regs. § 1.401(k)-1(d)(4)

E. Distribution from an ESOP Upon Plan Termination

F. Distribution from Other § 401(a) Plans Upon Plan Termination

G. Miscellaneous Issues in Event of Plan Termination

1. Treatment of Plan Loan in Event of Plan Termination

2. Treatment of Illiquid Plan Assets in Event of Plan Termination

3. Annuity Paid Upon Plan Termination to Individual Other Than Participant or Former Spouse

4. Additional Income Tax on Early Withdrawals Under § 72(t) Not Affected by Plan Termination

5. Reversion to Employer Upon Plan Termination Subject to Excise Taxes

VI. Tax Consequences Upon Plan Disqualification

A. General

B. Plan Defects Resulting in Disqualification

1. Form Defects

2. Operation Defects

C. Plan Disqualification Process

1. Determination Letter Application

2. Examination

D. Timing of Plan Disqualification

E. Tax Effects of Plan Disqualification

1. Effect of Disqualification on the Employer

a. Loss of Deductions

b. Other Effects

2. Effect of Disqualification on the Plan Trust

3. Effect of Disqualification upon Plan Participants

a. Vested Status

b. Highly Compensated Employees

c. Distributions

VII. Distributions Upon Merger/Acquisition of Plan Sponsor

Introductory Material

A. Separation from Service Standard for Distributions

1. Separation from Service Due to Corporate Acquisition

2. General Definition of "Separation from Service"

3. Former Employees as Independent Contractors and Consultants

4. Former Employees Who Become Partners or Board Members of the Employer

5. The "Same Desk" Rule

a. General

b. Revenue Rulings Regarding Separation from Service and the Same Desk Rule

c. Private Letter Rulings Regarding Separation from Service and the Same Desk Rule

d. Cases Treating the Same Desk Rule

B. Section 401(k) Plan Events Allowing Distributions - Separation from Service

1. Separation from Service as a Distributable Event for § 401(k) Plans

2. Sale of a Subsidiary as a Distributable Event for § 401(k) Plans

3. Distributions After 2001 Permitted Upon Severance from Employment

C. Lump-Sum Distributions Within One Tax Year of Separation from Service

D. Separation from Service as Applied to ESOPs

E. Alternatives/Options Available to Employers and Employees

1. Direct Transfer of Plan Benefits

a. Trustee-to-Trustee Transfer

b. Transfer to Employees

2. Spin-off and Termination of the Defined Benefit Plan Covering Former Employees

F. Merger of Puerto Rican Plan

VIII. Tax-Free Rollovers

A. General

B. Background

1. Pre-Unemployment Compensation Amendments of 1992

2. UCA Changes

a. Changes in the Rollover Rules

b. Right to Direct Plan-to-Plan Transfer

c. Withholding on Eligible Rollover Distributions

d. Written Explanation Requirement and Other UCA Changes

3. IRS Guidance on UCA Provisions

a. In General

b. Required Minimum Distributions

c. Substantially Equal Periodic Payments

d. Plan Loan Offset Amounts

4. EGTRRA Changes - Effective 2002

a. Rollover of After-Tax Contributions After 2001

b. Rollover of IRA Assets After 2001

c. Tax Treatment of IRA Assets Rolled Over After 2001

d. Rollover Treatment of Distributions to Surviving Spouse After 2001

e. Rollover Contributions Received from § 403(b) and Governmental § 457(b) Plans After 2001

f. Direct Rollovers to § 403(b) and Governmental § 457(b) Plans After 2001

g. Exception to 60-Day Rollover Requirement

C. Other Eligible Rollover Distributions

1. Introduction

2. Pre-1993 Lump-Sum Distributions

3. Distributions Upon Plan Termination

4. Distributions Upon Sale or Liquidation of Subsidiary

5. Distributions Attributable to Accumulated Deductible Employee Contributions/Voluntary Employee Contributions

6. Distributions from Money Purchase Pension Plans

7. Partial Distributions

8. U.S. Retirement Bonds

D. Transfers Treated as Rollover Transactions

1. Direct Transfers

2. Tax-Free Exchange of Annuity Contracts

E. Distributions to Nonemployees

1. Distribution to Surviving Spouse on Account of Employee's Death

2. Distributions Under Qualified Domestic Relations Orders

3. Rollovers by Nonspouse Beneficiaries of Certain Retirement Plan Distributions

F. Subsequent Rollover Transactions

1. Conduit IRA

2. Inherited IRAs

G. The Rollover Transaction

1. Conditions for Rollover Treatment

a. Distribution from Qualified Plan or Plan Treated as Qualified

b. Eligible Retirement Plans

c. Rollover Period and Election Procedure

d. Maximum Rollover Amount

2. Proceeds from the Sale of Distributed Property

3. Inapplicability of Active Participation Concept

4. Effect of Attaining Age 7012

5. Tax Consequences Associated with Rollover Transactions

H. Notice of Rollover Treatment

IX. Required Plan Distributions

Introductory Material

A. Commencement of Distributions Under the Plan

B. Minimum Distribution Incidental Benefit Requirement

1. 1987 Proposed Regulations

2. 2001 Proposed Regulations

3. 2002 Final and Temporary Regulations

4. 2004 Final Regulations

C. Minimum Required Distributions Under Post-TRA '86 Law

1. 1987 Proposed Regulations

a. Commencement

b. Term

(1) Designated Beneficiary

(2) Life Expectancy

c. Distributions Under Qualified Domestic Relations Orders

d. Amount of Payment

(1) Distributions to Participant

(2) Distributions Following Participant's Death

(a) Where Distributions Commenced After Death

(b) Where Distributions Commenced Before Death

2. 2001 Proposed Regulations

a. Separate Account Distributions

(1) Uniform Distribution Period During Participant's Lifetime

(2) Distribution Period Following Participant's Death

(a) Beneficiary Is Designated by Participant

(i) Participant's Death Before Participant's Required Beginning Date

(ii) Participant's Death On or After Participant's Required Beginning Date

(b) No Beneficiary Is Designated by Participant or Disclaimer by Designated Beneficiary

(3) Determination of Designated Beneficiary

(a) Trust as Beneficiary

(b) Election of Surviving Spouse to Treat an Inherited IRA as Spouse's Own IRA

(4) Provisions Regarding Qualified Domestic Relations Orders

b. Annuity Payments

(1) Determination of Designated Beneficiary

(2) Calculation of Annuity Payment

3. 2002 Final and Temporary Regulations

a. Separate Account Distributions

(1) Uniform Lifetime and Mortality Tables

(2) Determination of Designated Beneficiary

(a) Trust as Beneficiary

(b) Election of Surviving Spouse to Treat an Inherited IRA as Spouse's Own IRA

(3) Separate Accounts

(4) Elimination of Optional Forms of Benefit

b. Temporary Rules for Defined Benefit Plans and Annuity Contracts

4. 2004 Final Regulations for Defined Benefit Plans and Annuity Contracts

D. Impact of § 401(a)(9) on Rollovers and Transfers

1. Rollovers

2. Transfers

E. TEFRA § 242(b) Election

F. Effective Dates

1. 1987 Proposed Regulations

2. 2001 Proposed Regulations

3. 2002 Final and Temporary Regulations

4. 2004 Final Regulations

X. Special Taxation Rules

A. Federal Withholding Tax Provisions Applicable to Qualified Plan Distributions

1. Introduction

2. Designated Distributions

a. Definition

(1) Eligible Rollover Distributions

(2) Other Designated Distributions

b. Exceptions to Designated Distributions

3. Amount of Designated Distribution Subject to Withholding Tax

a. Distributions Including Property

b. Exclusion of Minimum Payments

c. Qualified Plan Loans

d. PS-58 Costs

e. Amount of Designated Distribution Not Includible in Gross Income

(1) General Guidelines

(2) Special Rules Applicable to Commercial Annuities and Life Insurance Contracts

f. Special Rules for Determining Amount of Designated Distribution

(1) Multiple Contracts

(2) Multiple Distributions

(3) Multiple Plans or Distributions Attributable to Multiple Employers

4. Amount of Withholding

a. Introduction

b. Periodic Distributions

c. Nonperiodic Payments

d. Withholding on Eligible Rollover Distributions

5. Liability for Withholding

a. General Rule

b. Transfer of Withholding Liability by Plan Administrator

c. Reliance by Payor

6. Notice and Election Procedure

a. Notice Requirement

(1) Person Responsible for Providing Notice

(2) Time and Method of Providing Notice

(a) Eligible Rollover Distributions

(b) Periodic Payments

(c) Nonperiodic Distributions

(d) Electronic Notice

b. Notice Provisions

(1) Required Provisions

(2) Desirable Information

c. Election of No Withholding

7. Recordkeeping and Reporting

a. Person Responsible for Recordkeeping and Reporting

b. Recordkeeping Requirements

c. Reporting Requirement

B. Federal Estate Taxation of Qualified Plan Distributions

C. State Taxation

D. Federal Excise and Additional Income Taxes

1. Early Distributions â€" Additional Income Tax on Early Withdrawals Under § 72(t)

a. Background

b. 10% Tax on Early Withdrawals

(1) Generally

(2) SIMPLE Retirement Accounts

(3) Federal Retirement System

(4) Net Unrealized Appreciation ("NUA")

(5) Deemed Distribution of Plan Loan

(6) Taxable Value of Life Insurance

(7) Eligible Rollover Distribution

(8) Involuntary Cash-Out

(9) Plan Termination

(10) Plan Disqualification

(11) Administrative Error or Mistake

(12) Tax Reform Act of 1986 Transitional Rules

(13) Qualified Voluntary Employee Contributions ("QVECs")

(14) Withholding and Reporting of Additional Income Tax

c. Exceptions to the Additional Income Tax on Early Withdrawals

(1) Periodic Payments

(2) Attainment of Age 591/2

(3) Death of the Participant

(4) Disability of the Participant

(5) Public Safety Employees

(6) Separation from Service After Attaining Age 55

(7) ESOP Dividends

(8) Federal Tax Levy

(9) Incurred Medical Expenses

(10) QDRO Payments to Alternate Payees

(11) Corrective Distributions

(12) After-Tax Contributions

(13) Distributions from Individual Retirement Accounts

(a) Higher Education Expenses

(b) First-Time Home Purchase

(c) Health Insurance Premiums for Unemployed Individuals

(14) Qualified Reservist Distributions

d. Additional Income Tax on Excessive Benefits to 5% Owners

2. Excess Distributions - Tax on Excess Retirement Distributions or Accumulations Under Former § 4980A

a. Excise Tax on Excess Retirement Distributions

b. Estate Tax on Excess Retirement Accumulations

3. Late Distributions - Excise Tax on Failure to Make Required Minimum Distributions Under § 4974

E. 2005 Hurricane Relief

1. General

2. Early Withdrawals

3. Cancelled Home Purchases and Construction

4. Plan Loans

5. Plan Amendments

F. Postponements due to Federally Declared Disaster or Terroristic or Military Actions


WORKING PAPERS

Working Papers

Table of Worksheets

Worksheet 1 Sample Employee Tax Notice Regarding Plan Payments (Code § 402(h) Notice)

Worksheet 2 Sample Benefit Distribution Request Form and Participant and Spousal Waiver of Joint and Survivor Annuity

Worksheet 3 Sample Death Benefit Distribution Request Form

Worksheet 4 Sample Qualified Domestic Relations Order Distribution Election Form

Worksheet 5 Sample Notice of Withholding on Periodic Payments

Worksheet 6 Sample Request to Rollover Funds from Prior Plan Distribution

Worksheet 7 Sample Beneficiary Designation Form

Worksheet 7A Notice of Distribution of Excess Contributions

Worksheet 8 Rollover Chart

Bibliography

OFFICIAL

Statutes:

Treasury Regulations:

Labor Regulations:

Treasury Rulings:

Cases:

UNOFFICIAL

Treatises:

Periodicals:

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2008