lump sum distribution - Financial Planners, Articles and Q&A

Lump-Sum Distribution

When an individual chooses to have the total balance of their employer created qualified plans over the course of one tax year, this is lump-sum distribution. This distribution may be used in the following situations: when the employee is 59 years and 6 months old, the employee has died (beneficiaries attain lump sum), the employee resigns (not applicable to self-employed persons), the employee becomes disabled (applicable only to those self-employed). Five years of participation must be completed before eligibility for a lump-sum distribution. For those born before 1936, a set tax of 20% is applied to the lump sum.

Fast Facts

In the case of death during the five-year participation period, it is voided for beneficiaries.
Included plans are pensions, profit-sharing plans and stock bonus plans.

lump sum distribution - Financial Planners, Articles and Q&A

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