Fillable Withdrawal Application Rs 5014 (Page 3 of 4) in pdf

RS 5014 (Rev. 11/12) Page 3

IncomE tAX wIthholdIng:

Mandatory Withholding. If any portion of the payment to you is an eligible rollover distribution of $200 or more, the Retirement System is required by law

to withhold 20% of that amount. This amount is sent to the IRS as income tax withholding. For example, if your eligible rollover distribution is $10,000,

only $8,000 will be paid to you because the Retirement System must withhold $2,000 as income tax. However, when you prepare your income tax return

for the year, you will report the full $10,000 as a payment from the Retirement System. You will report the $2,000 as tax withheld and it will be credited

against any income tax you owe for the year.

Sixty-Day Rollover Option. If you have an eligible rollover distribution paid to you, you can still decide to roll over all or part of it to an IRA or another

employer plan that accepts rollovers. If you decide to roll over, you must make the rollover within 60 days after you receive the payment. The portion of

your payment that is rolled over will not be taxed until you take it out of the IRA or the employer plan. You can roll over up to 100% of the eligible rollover

distribution including an amount equal to the 20% that was withheld. If you choose to roll over 100%, you must find other money within the 60-day period

to contribute to the IRA or the other employer plan to replace the 20% that was withheld. On the other hand, if you roll over only the 80% that you received,

you will be taxed on the 20% that was withheld.

Example: Your eligible rollover distribution is $10,000 and you choose to have it paid to you. You will receive $8,000 and $2,000

will be sent to the IRS as income withholding. Within 60 days after receiving the $8,000, you may roll over the entire $10,000 to

an IRA or employer plan. To do this you roll over the $8,000 you received from the Retirement System and you will have to find

$2,000 from other sources (your savings, a loan, etc.). In this case the entire $10,000 is not taxed until you take it out of the IRA or

employer plan. If you roll over the entire $10,000, when you file your income tax return you may get a refund of the $2,000 withheld.

If, on the other hand, you roll over the $8,000, the $2,000 you did not rollover is taxed in the year it was withheld. When you file

your income tax return you may get a refund of part of the $2,000 withheld. (However, any refund is likely to be larger if you roll

over the entire $10,000).

Additional 10% Tax If You Are Under Age 55. If you receive a payment before the age of 55 and you do not roll it over, then, in addition to the regular income

tax, you may have to pay an extra tax equal to 10% of the taxable portion of the payment. The additional 10% tax does not apply to your payment if it is

(1) paid to you because you separate from service with your employer during or after the year you reach age 55, (2) used to pay certain medical expenses.

See IRS Form 5329 for more information on the additional 10% tax.

Special Tax Treatment. If your eligible rollover distribution is not rolled over, it will be taxed in the year you receive it. However, if it qualifies as a “lump sum

distribution”, it may be eligible for special tax treatment. A lump sum distribution is a payment, within one year, of your entire balance with the Retirement

System that is payable to you because you have separated from service with your employer. For a payment to qualify as a lump sum distribution, you must

have been a participant in the Retirement System for at least five years. The special tax treatment for lump sum distributions is described below.

Ten Year Averaging. If you were born before January 1, 1936. If you receive a lump sum distribution and you were born before

January 1, 1936, you can make a one-time election to figure the tax on the payment by using “10-year averaging” (using 1986

tax rates). The 10-year averaging rules often reduces the tax you owe.

Capital Gain Treatment. If you were born before January 1, 1936. In addition, if you receive a lump sum distribution and you were

born before January 1, 1936, you may elect to have the part of your payment that is attributable to your pre-1974 participation in

the retirement systems (if any) taxed as long-term capital gain at a rate of 20%. There are other limits on the special tax treatment

for lump sum distributions. For example, you can generally elect this special tax treatment only once in your lifetime and the

election applies to all lump sum distributions that you receive in that same year. If you have previously rolled over a payment

from the Retirement System, you cannot use this special tax treatment for later payments from the Retirement System. If you

roll over your payment to an IRA, you will not be able to use this special tax treatment for later payments from the IRA. Also,

if you roll over only a portion of your payment to an IRA, this special tax treatment is not available for the rest of the payment.

Additional restrictions are described in IRS form 4972, which has more information on lump sum distributions and how you elect

the special tax treatment.

how to obtAIn AddItIonAl InfoRmAtIon

This notice summarizes only the Federal (not State or local) tax rules that might apply to your payment. The rules described above are complex and contain

many conditions and exceptions that are not included in this notice. Therefore, you may want to consult with a professional tax advisor before you take

a payment of your withdrawal from the Retirement System. Also, you can find more specific information on the tax treatment of payments from qualified

retirement plans in IRS Publication 575, Pension and Annuity Income, and IRS Publication 590, Individual Retirement Arrangements. These publications

are available from your local IRS office, the IRS’s Internet Website at or by calling 1-800-TAX-FORMS.