If you choose to have your distribution paid directly to you:
- you will receive only 80 percent of the payment, because Federal law requires that the Plan withhold 20 percent of the payment and send it to the Internal Revenue Service as income tax withholding to be credited against your taxes;
- your payment will be taxed to you in the year distribution is made unless you roll it over to a non-Roth IRA. If you receive a payment before age 59½, you also may have to pay an additional 10 percent federal excise tax for early withdrawal (plus any applicable state penalty tax for an early withdrawal). If you terminate employment during or after the calendar year in which you reach age 55, you may receive payment without the additional 10% federal excise tax;
- you may roll over the distribution by paying it within 60 days of receiving the payment to your IRA or to another qualified retirement plan that accepts your rollover, and the amount will not be not be taxed until you take it out of the IRA or other qualified retirement plan; or if you want to roll over 100 percent of the payment to an IRA or another employer’s retirement plan that accepts your rollover, you must find other money to replace the 20 percent that was withheld (if you roll over only the 80 percent that you received, you will be taxed on the 20 percent that was withheld and is not rolled over).
Federal law requires the Fund Office to provide you with a “Special Tax Notice Regarding Plan Payments” if you apply for a distribution that can be rolled over. This notice describes your rights and obligations regarding rollovers and withholding requirements. John Hancock, the Plan’s recordkeeper, will send you this notice along with the Distribution Form.