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Publication 560


Amounts paid to plan participants from a qualified plan are called distributions. Distributions may be nonperiodic, such as lump-sum distributions, or periodic, such as annuity payments. Also, certain loans may be treated as distributions. See Loans Treated as Distributions in Publication 575.

Required Distributions(p18)

A qualified plan must provide that each participant will either:
These distribution rules apply individually to each qualified plan. You can't satisfy the requirement for one plan by taking a distribution from another. The plan must provide that these rules override any inconsistent distribution options previously offered.

Minimum distribution.(p18)

If the account balance of a qualified plan participant is to be distributed (other than as an annuity), the plan administrator must figure the minimum amount required to be distributed each distribution calendar year. This minimum is figured by dividing the account balance by the applicable life expectancy. The plan administrator can use the life expectancy tables in Publication 590-B for this purpose. For more information on figuring the minimum distribution, see Tax on Excess Accumulation in Publication 575.

Required beginning date.(p18)

Generally, each participant must receive his or her entire benefits in the plan or begin to receive periodic distributions of benefits from the plan by the required beginning date.
A participant must begin to receive distributions from his or her qualified retirement plan by April 1 of the first year after the later of the following years.
  1. Calendar year in which he or she reaches age 701/2.
  2. Calendar year in which he or she retires from employment with the employer maintaining the plan.
However, the plan may require the participant to begin receiving distributions by April 1 of the year after the participant reaches age 701/2 even if the participant has not retired.
If the participant is a 5% owner of the employer maintaining the plan, the participant must begin receiving distributions by April 1 of the first year after the calendar year in which the participant reached age 701/2. For more information, see Tax on Excess Accumulation in Publication 575.
Distributions after the starting year.(p18)
The distribution required to be made by April 1 is treated as a distribution for the starting year. (The starting year is the year in which the participant meets (1) or (2) above, whichever applies.) After the starting year, the participant must receive the required distribution for each year by December 31 of that year. If no distribution is made in the starting year, required distributions for 2 years must be made in the next year (one by April 1 and one by December 31).
Distributions after participant's death.(p18)
See Publication 575 for the special rules covering distributions made after the death of a participant.

Distributions From 401(k) Plans(p19)

Generally, distributions can't be made until one of the following occurs.
Certain distributions listed above may be subject to the tax on early distributions discussed later.

Qualified reservist distributions.(p19)

A qualified reservist distribution is a distribution from an IRA or an elective deferral account made after September 11, 2001, to a military reservist or a member of the National Guard who has been called to active duty for at least 180 days or for an indefinite period. All or part of a qualified reservist distribution can be recontributed to an IRA. The additional 10% tax on early distributions doesn't apply to a qualified reservist distribution.

Tax Treatment of Distributions(p19)

Distributions from a qualified plan minus a prorated part of any cost basis are subject to income tax in the year they are distributed. Since most recipients have no cost basis, a distribution is generally fully taxable. An exception is a distribution that is properly rolled over as discussed under Rollover, next.
The tax treatment of distributions depends on whether they are made periodically over several years or life (periodic distributions) or are nonperiodic distributions. See Taxation of Periodic Payments and Taxation of Nonperiodic Payments in Publication 575 for a detailed description of how distributions are taxed, including the 10-year tax option or capital gain treatment of a lump-sum distribution.
Note.A recipient of a distribution from a designated Roth account will have a cost basis since designated Roth contributions are made on an after-tax basis. Also, a distribution from a designated Roth account is entirely tax-free if certain conditions are met. See Qualified distributions under Qualified Roth Contribution Program, earlier.


The recipient of an eligible rollover distribution from a qualified plan can defer the tax on it by rolling it over into a traditional IRA or another eligible retirement plan. However, it may be subject to withholding as discussed under Withholding requirement, later. A rollover can also be made to a Roth IRA, in which case, any previously untaxed amounts are includible in gross income unless the rollover is from a designated Roth account.
Eligible rollover distribution.(p19)
This is a distribution of all or any part of an employee's balance in a qualified retirement plan that isn't any of the following.
  1. A required minimum distribution. See Required Distributions, earlier.
  2. Any of a series of substantially equal payments made at least once a year over any of the following periods.
    1. The employee's life or life expectancy.
    2. The joint lives or life expectancies of the employee and beneficiary.
    3. A period of 10 years or longer.
  3. A hardship distribution.
  4. The portion of a distribution that represents the return of an employee's nondeductible contributions to the plan. See Employee Contributions, earlier, and Rollover of nontaxable amounts, next.
  5. Loans treated as distributions.
  6. Dividends on employer securities.
  7. The cost of any life insurance coverage provided under a qualified retirement plan.
  8. Similar items designated by the IRS in published guidance. See, for example, the Instructions for Forms 1099-R and 5498.

Rollover of nontaxable amounts. (p19)

You may be able to roll over the nontaxable part of a distribution to another qualified retirement plan or a section 403(b) plan, or to an IRA. If the rollover is to a qualified retirement plan or a section 403(b) plan that separately accounts for the taxable and nontaxable parts of the rollover, the transfer must be made through a direct (trustee-to-trustee) rollover. If the rollover is to an IRA, the transfer can be made by any rollover method.
Note.A distribution from a designated Roth account can be rolled over to another designated Roth account or to a Roth IRA. If the rollover is to a Roth IRA, it can be rolled over by any rollover method, but if the rollover is to another designated Roth account, it must be rolled over directly (trustee-to-trustee).
More information.(p19)
For more information about rollovers, see Rollovers in Publications 575 and 590-A. For rules on rolling over distributions that contain nontaxable amounts, see Notice 2014-54, 2014-41 I.R.B. 670, available at For guidance on rolling money into a qualified plan, see Rev. Rul. 2014-9, 2014-17 I.R.B. 975, available at

Withholding requirement.(p19)

If, during a year, a qualified plan pays to a participant one or more eligible rollover distributions (defined earlier) that are reasonably expected to total $200 or more, the payor must withhold 20% of the taxable portion of each distribution for federal income tax.
If, instead of having the distribution paid to him or her, the participant chooses to have the plan pay it directly to an IRA or another eligible retirement plan (a direct rollover), no withholding is required.
If the distribution isn't an eligible rollover distribution, defined earlier, the 20% withholding requirement doesn't apply. Other withholding rules apply to distributions that aren't eligible rollover distributions, such as long-term periodic distributions and required distributions (periodic or nonperiodic). However, the participant can choose not to have tax withheld from these distributions. If the participant doesn't make this choice, the following withholding rules apply.
Estimated tax payments.(p19)
If no income tax is withheld or not enough tax is withheld, the recipient of a distribution may have to make estimated tax payments. For more information, see Withholding Tax and Estimated Tax in Publication 575.

Section 402(f) Notice.(p19)

If a distribution is an eligible rollover distribution, as defined earlier, you must provide a written notice to the recipient that explains the following rules regarding such distributions.
  1. That the distribution may be directly transferred to an eligible retirement plan and information about which distributions are eligible for this direct transfer.
  2. That tax will be withheld from the distribution if it isn't directly transferred to an eligible retirement plan.
  3. That the distribution won't be subject to tax if transferred to an eligible retirement plan within 60 days after the date the recipient receives the distribution.
  4. Certain other rules that may be applicable.
Notice 2014-74, 2014-50 I.R.B 937, available at, contains two updated safe harbor section 402(f) notices that plan administrators may provide recipients of eligible rollover distributions.
Timing of notice.(p19)
The notice generally must be provided no less than 30 days and no more than 180 days before the date of a distribution.
Method of notice.(p19)
The written notice must be provided individually to each distributee of an eligible rollover distribution. Posting of the notice isn't sufficient. However, the written requirement may be satisfied through the use of electronic media if certain additional conditions are met. See Regulations section 1.401(a)-21.
Tax on failure to give notice.(p19)
Failure to give a 402(f) notice will result in a tax of $100 for each failure, with a total not exceeding $50,000 per calendar year. The tax won't be imposed if it is shown that such failure is due to reasonable cause and not to willful neglect.

Tax on Early Distributions(p20)

If a distribution is made to an employee under the plan before he or she reaches age 591/2, the employee may have to pay a 10% additional tax on the distribution. This tax applies to the amount received that the employee must include in income.


The 10% tax won't apply if distributions before age 591/2 are made in any of the following circumstances.

Reporting the tax.(p20)

To report the tax on early distributions, file Form 5329. See the form instructions for additional information about this tax.

Tax on Excess Benefits(p20)

If you are or have been a 5% owner of the business maintaining the plan, amounts you receive at any age that are more than the benefits provided for you under the plan formula are subject to an additional tax. This tax also applies to amounts received by your successor. The tax is 10% of the excess benefit includible in income.
To determine whether or not you are a 5% owner, see section 416.

Reporting the tax.(p20)

Include on Form 1040, line 62, any tax you owe for an excess benefit. On the dotted line next to the total, write "Sec. 72(m)(5)" and write in the amount.

Lump-sum distribution.(p20)

The amount subject to the additional tax isn't eligible for the optional methods of figuring income tax on a lump-sum distribution. The optional methods are discussed under Lump-Sum Distributions in Publication 575.

Excise Tax on Reversion of Plan Assets(p20)

A 20% or 50% excise tax is generally imposed on the cash and fair market value of other property an employer receives directly or indirectly from a qualified plan. If you owe this tax, report it on Schedule I of Form 5330. See the form instructions for more information.

Notification of Significant Benefit Accrual Reduction(p20)

An employer or the plan will have to pay an excise tax if both the following occur.
A plan amendment that eliminates or reduces any early retirement benefit or retirement-type subsidy reduces the rate of future benefit accrual.
The notice must be written in a manner calculated to be understood by the average plan participant and must provide enough information to allow each individual to understand the effect of the plan amendment. It must be provided within a reasonable time before the amendment takes effect.
The tax is $100 per participant or alternate payee for each day the notice is late, the total tax can't be more than $500,000 during the tax year. It is imposed on the employer, or, in the case of a multi-employer plan, on the plan.