Payment of the entire balance in a participant’s account within his/her taxable year. The distribution is generally only considered a lump-sum distribution if it is paid as a result of the death of the participant, as a result of the participant’s separation from service, or after the participant reaches age 59 and 1/2. A-H R-Z mandatory 20 percent withholding If a distribution from a section 401 qualified plan is an “eligible rollover distribution” and the participant does not make a direct rollover, 20 percent of the distribution must be withheld for federal income taxes. Participants cannot elect a lower rate of withholding, even if they intend to make a rollover within 60 days of the distribution.
What you get when you withdraw all your money from your retirement plan in the same year.
A type of distribution that is required for purposes of using the forward averaging method in computing the income tax that is due. The basic requirements to qualify as a lump sum distribution are (1) the distribution must be made within one taxable year of the recipient, (2) it must include the entire balance credited to an employee's account, and (3) it must be made on account of an employee's death, separation from service (except in the case of a self-employed person), or attainment of age 59-1/2 (or in the case of a self-employed person only, on account of disability).