Navigating Pension and Annuity Payments: General Rule and Taxation Guidelines

Learn how to identify the current rules for navigating distributions within retirement plans, along with gaining new tips and tricks for a more successful process.

Employers and those involved in administering retirement plans often do not understand the rules for navigating distributions from such plan. For example, how do the rules for when an employee can take a distribution interrelate with the rules for when an employee is subject to tax penalties on a distribution? Can an employee take a distribution of nontaxable amounts from a plan without also taking amounts subject to tax? How is a distribution initiated by the employer to solve a discrimination issue taxed? Who is taxed, and in what amount, if a distribution is made pursuant to a domestic relations order? What are the tax consequences if a loan is not repaid when due? What is the difference between a rollover of a distribution and a plan-to-plan transfer? For an employee who has a hardship, is it better to take a hardship distribution or a plan loan? Under what circumstances is withholding required, and in what amount? How are distributions reported to an employee? How does the employee report a distribution on his or her income tax return? This topic helps those responsible for retirement plans master both withholding and income tax aspects of a wide variety of distribution situations. The material also discusses tax planning opportunities for those considering a distribution. Errors in handling plan distributions can not only cause harm to participants, but endanger the qualification of the pension plan itself. This information is critical for employers and those involved in administering plans, so that they can ensure that their reporting and withholding procedures, and the information they provide to participants, are correct.

Faculty

Carol V. Calhoun

Venable LLP