Special Tax Notice Regarding Plan Payments

From Plans Qualified Under Section 401(a) and 401(k) Plans, Section 403(a) Annuity Plans, Section 403(b) Tax Sheltered Annuities/403(b)(7) Custodial Accounts and 457(b) Governmental Deferred Compensation Plans

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Important Notice

You are receiving this notice because all or a portion of a payment you are receiving is eligible to be rolled over to an IRA or an employer plan, or you have a designated Roth Account that is eligible to be rolled over to a Roth IRA or a designated Roth account in an employer plan. This notice is intended to help you decide whether to do such a rollover.

A rollover allows you to continue to postpone taxation of your distribution from an eligible employer plan until it is paid to you. An "eligible employer plan" includes a plan qualified under section 401(a) of the Internal Revenue Code, including a 401(k) plan, profit-sharing plan, defined benefit plan, stock bonus plan, and money purchase plan; a section 403(a) annuity plan; a section 403(b) tax-sheltered annuity; and an eligible section 457(b) governmental plan.

Key Points

  • You will be taxed on a payment from the Plan if you do not roll it over.
  • If you are under age 59½ and do not do a rollover, you will also have to pay a 10% additional income tax on early distributions (unless an exception applies).
  • If you do a rollover, you will not have to pay tax until you receive payments later.
  • The Plan is required to withhold 20% of the payment for federal income taxes if you do not do a direct rollover.
  • You have 60 days after receiving a payment to complete a rollover if you don't do a direct rollover.

Where may I roll over the payment?

  • An IRA (individual retirement account or individual retirement annuity)
  • An employer plan (a tax-qualified plan, section 403(b) plan, or governmental section 457(b) plan) that will accept the rollover

An eligible employer plan is not legally required to accept a rollover. Before you decide to roll over your payment to another employer plan, you should find out whether the plan accepts rollovers and, if so, what documents are required to be completed before the receiving plan will accept a rollover.

How to Do a Rollover

Direct Rollover

The Plan will make the payment directly to your IRA, Roth IRA or an employer plan. You should contact the IRA sponsor, Roth IRA sponsor (for designated Roth account) or the administrator of the employer plan for information on how to do a direct rollover.

✓ No taxes are withheld from a direct rollover.

60-Day Rollover

If you do not do a direct rollover, you may still do a rollover by making a deposit into an IRA, Roth IRA or eligible employer plan that will accept it. You will have 60 days after you receive the payment to make the deposit.

⚠ If you do not do a direct rollover, the Plan is required to withhold 20% of the payment for federal income taxes (up to the amount of cash and property received other than employer stock). This means that, in order to roll over the entire payment in a 60-day rollover, you must use other funds to make up for the 20% withheld.

10% Additional Income Tax on Early Distributions

If you are under age 59½, you will have to pay the 10% additional income tax on early distributions for any payment from the Plan (including amounts withheld for income tax) that you do not roll over, unless one of the exceptions listed below applies.

Payments NOT Eligible for Rollover

The following types of payments cannot be rolled over:

  • Certain payments spread over a period of at least 10 years or over your life or life expectancy
  • Required minimum distributions after age 70½ (if you were born before July 1, 1949), age 72 (if you were born after June 30, 1949 but before January 1, 1951), or age 73 (if you were born after December 31, 1950) or after death
  • Hardship distributions
  • ESOP dividends
  • Corrective distributions of contributions that exceed tax law limitations
  • Loans treated as deemed distributions
  • Cost of life insurance paid by the Plan
  • Payments of certain automatic enrollment contributions requested to be withdrawn within 90 days of the first contribution

State Income Tax

This notice does not describe any State or local income tax rules (including withholding rules).

Additional Resources

For more detailed information, consult the following IRS publications:

  • IRS Publication 575: Pension and Annuity Income
  • IRS Publication 590-A: Contributions to Individual Retirement Arrangements (IRAs)
  • IRS Publication 590-B: Distributions from Individual Retirement Arrangements (IRAs)
  • IRS Publication 571: Tax-Sheltered Annuity Plans (403(b) Plans)

These publications are available from a local IRS office, on the web at www.irs.gov, or by calling 1-800-TAX-FORM.

Questions About This Notice?

If you have additional questions after reading this notice, you can contact your plan administrator at TCG Administrators:

Phone: (888) 989-9247

Address: 900 S Capital of Texas Hwy, Suite 350, Austin, Texas 78746

Website: www.tcgservices.com

This notice is provided for informational purposes only. It is not tax or legal advice. You may wish to consult with a tax advisor or attorney before making decisions about your retirement plan distribution.