Summary Plan Description Table of Contents
Tax Information
How your benefit is taxed depends on how and when you receive your distribution from the Retirement Savings Fund. Before the Plan makes a taxable payment to you or your beneficiary, the Plan will provide you with a tax notice. This notice explains the tax rules that apply to distributions from the Plan. It also informs you that you have the right to have your lump-sum taxable payment:
- Paid directly to you;
- Paid as a “direct rollover” to an eligible retirement plan or to an individual retirement account (IRA), as specified on page 14; or
- Split between payment to you and payment as a direct rollover.
To determine what may be the best way for you to receive payment of your account and the tax consequences of the benefits you receive, consult a qualified tax advisor.
Direct Payment
Because of how frequently tax laws change and the complexity of the tax laws applicable to Retirement Savings Fund distributions, you should consult a qualified tax advisor before receiving a distribution from the Retirement Savings Fund.
Whenever a taxable distribution is paid directly to you or your beneficiary, 20% of the distribution will automatically be withheld to pay federal income taxes. The entire distribution is considered taxable income in the year it is received.
To defer payment of the 20% withholding tax, you may “roll over” your distribution to an eligible retirement plan within 60 days of receipt of your distribution. However, this 60-day period may be extended in certain cases. Please contact the Fund Office for more details.
Penalty Tax
In addition to withholding 20% for federal income taxes, a 10% penalty tax may apply if payment is received before age 59½. The 10% penalty tax does not apply if the payment is received due to:
- Separation from covered employment on or after attaining age 55;
- Total and permanent Disability;
- Death;
- Payment of certain medical expenses; or
- A Qualified Domestic Relations Order (QDRO).
In addition, the 10% penalty tax will not apply to distributions paid to you as equal (or almost equal) payments over your life (or your and your beneficiary’s lives).
This penalty tax is in addition to your regular federal income taxes (and any applicable state income taxes and penalties).
Rollovers
If you or your spouse becomes eligible for a distribution from the Retirement Savings Fund, payment of the 20% withholding tax may be deferred and the 10% penalty may be avoided by rolling over the taxable portion of the distribution to an eligible retirement plan or IRA that accepts rollovers.
To be considered an eligible retirement plan, a plan must accept rollovers and be:
- A traditional individual retirement account described in Internal Revenue Code Section 408(a), an individual retirement annuity described in Internal Revenue Code Section 408(b), or Roth IRA described in Internal Revenue Code Section 408A (not SIMPLE IRA or Coverdell Education Savings Account, formerly known as an education IRA); or
- An eligible employer plan, which includes a plan qualified under section 401(a) of the Internal Revenue Code (including a 401(k) plan, profitsharing plan, defined benefit plan, stock bonus plan, money purchase plan, section 403(a) annuity plan, section 403(b) tax-sheltered annuity, and eligible section 457(b) plan maintained by a governmental employer).
Surviving spouses who receive a distribution may also rollover the benefits to an eligible retirement plan. A non-spouse beneficiary may only roll over the benefits to an inherited IRA.
If you elect to receive your Retirement Savings Fund benefit directly and later decide to roll it over, you must do so within 60 days to avoid the 10% tax penalty if it would otherwise apply.
Any portion you don’t roll over will be taxable in the year in which it is received. Keep in mind that the Fund must withhold 20% in federal taxes from any distribution that is paid directly to you. Therefore, if you roll over your full distribution after payment is made directly to you, you must replace the 20% difference from your own funds. If you do not make up the 20% difference, it will be taxable income to you. To avoid the 20% tax, you can have the Plan make a direct rollover into the eligible retirement plan.
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); or
- Your lifetime and your beneficiary’s lifetime (or life expectancies); or
- A period of ten or more years.
Beginning on the April 1 of the year following the year you reach age 70½ (age 72 if you turned 70½ after December 31, 2019), a certain portion of your payment cannot be rolled over because it is a “required minimum payment” that must be paid to you.