Your Rollover Options

All or a portion of a payment you receive from the Plan is eligible to be rolled over to an Individual Retirement Account (“IRA”) or an employer plan. This notice is intended to help you decide whether to do such a rollover (and is patterned on an IRS Sample Notice). Rollover rules apply to payments from the Plan that are not from a designated Roth account (a type of account with special tax rules in some employer plans).

Rules that apply to most payments from a plan are described in the “General Information About Rollovers” section. Special rules that only apply in certain circumstances are described in the “Special Rules and Options” section below.

It is recommended that you consult with a professional tax advisor if you have questions before taking a payment from the Plan. You also may speak to the Plan Office (but the Plan Office does not provide tax advice). Also, you can find more detailed information on the federal tax treatment of payments from plans in: IRS Publication 575, Pension and Annuity Income; IRS Publication 590-A Contributions to Individual Retirement Arrangements (IRAs); IRS Publication 590-B, Distributions from Individual Retirement Arrangements (IRSs); and IRS Publication 571, Tax-Sheltered Annuity Plans (403(b) Plans). These publications are available from a local IRS office, on the web at www.irs.gov, or by calling 1-800-TAX-FORM.

General Information About Rollovers

How can a rollover affect my taxes?

You will be taxed on a payment from the Plan if you do not roll it over. If you are under age 59½ (age 55 if you terminated your Covered Employment on or after age 55) and do not do a rollover, you will also have to pay a 10% additional income tax on early distributions (generally distributions made before age 59½ unless an exception applies). If, however, you do a rollover, you will not have to pay tax until you receive payments later and the 10% additional income tax (and premature state tax penalty) will not apply if those payments are made after you are age 59½ ( or if an exception applies).

What types of retirement accounts and plans may accept my rollover?

You may roll over the payment to either an IRA (an individual retirement account or individual retirement annuity) or an employer plan (a tax-qualified plan, section 403(b) plan, or governmental section 457(b) plan) that will accept the rollover. The rules of the IRA or employer plan that holds the rollover will determine your investment options, fees, and rights to payment from the IRA or employer plan (for example, no spousal consent rules apply to IRAs and IRAs may not provide loans). Further, the amount rolled over will become subject to the tax rules that apply to the IRA or employer plan.

How do I do a rollover?

There are two ways to do a rollover. You can do either a direct rollover or a 60-day rollover.

  1. If you do a direct rollover, the Plan will make the payment directly to your IRA or an employer plan. You should contact the IRA sponsor or the administrator of the employer plan for information on how to do a direct rollover.
  2. If you do not do a direct rollover, you may still do a rollover by making a deposit into an IRA or eligible employer plan that will accept it. You will have 60 days after you receive the payment to make the deposit. If you do not do a direct rollover, the Plan is required to withhold 20% of the payment for federal income taxes (up to the amount of cash). This means that in order to roll over the entire payment in a 60-day rollover, you must use other funds to make up for the 20% withheld. If you do not roll over the entire amount of the payment, the portion not rolled over will be taxed and will be subject to the 10% additional federal income tax ( and potential State tax penalties, which is 2.5% in California) on early distributions if you are under age 59½ (unless an exception applies, such as terminating your employment on or after age 55).
How much may I roll over?

If you wish to do a rollover, you may roll over all or part of the amount eligible for rollover. Any payment from the Plan is eligible for rollover, except:

  • Certain payments spread over a period of at least 10 years or over your life or life expectancy ( or the lives or joint life expectancy of you and your beneficiary);
  • Required minimum distributions at age 73 for any person attaining age 72 after December 31, 2022 (if you attained age 70-1/2 prior to January 1, 2020, your Required Minimum Distribution Age is age 70-1/2, and if you were born after June 30, 1949, the RMD is age 72 ) or after death;
  • Hardship distributions;
  • Corrective distributions of contributions that exceed tax law limitations;
  • Loans treated as deemed distributions (for example, loans in default due to missed payments before your employment ends).
If I don't do a rollover, will I have to pay the 10% additional income tax on early distributions?

If you are under age 59½, you will have to pay the 10% additional income tax on early distributions for any payment from the Plan (including amounts withheld for income tax) that you do not roll over, unless one of the exceptions listed below applies. This tax applies to the part of the distribution that you must include in income and is in addition to the regular income tax on the payment not rolled over.

The 10% additional income tax does not apply to the following payments from the Plan:

  • Payments made after you separate from service if you will be at least age 55 in the year of the separation;
  • Payments that start after you separate from service if paid at least annually in equal or close to equal amounts over your life or life expectancy ( or the lives or joint life expectancy of you and your beneficiary);
  • Payments made due to certain disabilities;
  • Payments after your death;
  • Corrective distributions of contributions that exceed tax law limitations;
  • Payments made directly to the government to satisfy a federal tax levy;
  • Payments made under a qualified domestic relations order (QDRO);
  • Payments of up to $5,000 made to you from a defined contribution plan if the payment is a qualified birth or adoption distribution;
  • Payments up to the amount of your deductible medical expenses (without regard to whether you itemize deductions for the taxable year)
  • Certain payments made while you are on active duty if you were a member of a reserve component called to duty after September 11, 2001 for more than 179 days; and
  • Payments excepted from the additional income tax by federal legislation relating to certain emergencies and disasters.
  • Payments made to a Participant after December 31,2022, if the person is not working in Covered Employment and has been determined to be terminally ill (physician certifies the illness or condition is reasonably expected to result in death in 84 months or less); and
  • Payments made after December 31, 2022, to a Participant living in a federally declared disaster area who suffered harm as a result of the disaster up to a maximum of $22,000.
If I do a rollover to an IRA, will the 10% additional income tax apply to early distributions from the IRA?

If you receive a payment from an IRA when you are under age 59½, you will have to pay the 10% additional income tax on early distributions from the IRA, unless an exception applies. In general, the exceptions to the 10% additional income tax for early distributions from an IRA are the same as the exceptions listed above for early distributions from a Plan. There are, however, a few differences for payments from an IRA, including:

  • The exception for payments made after you separate from service if you will be at least age 55 in the year of the separation does not apply.
  • The exception for qualified domestic relations orders (QDROs) does not apply ( although a special rule applies under which, as part of a divorce or separation agreement, a tax-free transfer may be made directly to an IRA of a spouse or former spouse).
  • The exception for payments made at least annually in equal or close to equal amounts over a specified period applies without regard to whether you have had a separation from service.

Additional exceptions apply for payments from an IRA, including:

  1. payments for qualified higher education expenses,
  2. payments up to $10,000 used in a qualified first-time home purchase, and
  3. payments for health insurance premiums after you have received unemployment compensation for 12 consecutive weeks (or would have been eligible to receive unemployment compensation but for self-employed status).
Will I owe State income taxes? Yes, most likely.

This IRS-mandated Notice, which is patterned on an IRS Sample Notice, is not intended to address state taxes if you are under age 59-1/2 (and age 55 if you are terminated on or after age 55). The following information is provided for your assistance. If you reside in California, you will owe taxes on a distribution, including the premature tax distribution penalty of 2.5%. Please note that state or local income tax is withheld only for those states where such withholding is mandatory. If you reside in a state that has a state income tax, and the state does not have a mandatory withholding rule, you will be responsible for any state income taxes due on the taxable po1iion of your distribution.

Special Rules and Options

If you miss the 60-day rollover deadline

Generally, the 60-day rollover deadline cannot be extended. The IRS has, however, the limited authority to waive the deadline under ce1iain extraordinary circumstances, such as when external events prevented you from completing the rollover by the 60-day rollover deadline. Under certain circumstances, you may claim eligibility for a waiver of the 60-day rollover deadline by making a written self-certification. Otherwise, to apply for a waiver from the IRS, you must file a private letter ruling request with the IRS. Private letter ruling requests require the payment of a non-refundable user fee. For more information, see IRS Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs).

If you have an outstanding loan that is being offset

If you have an outstanding loan from the Plan, your Plan benefit may be offset by the amount of the loan, typically when your employment ends. The loan offset amount is treated as a distribution to you at the time of the offset. Generally, you may roll over all or any portion of the offset amount. Any offset amount that is not rolled over will be taxed (including the 10% additional income tax on early distributions, unless an exception applies, as well as the state premature tax penalty, if applicable). You may roll over offset amounts to an IRA or an employer plan (if the terms of the employer plan permit the plan to receive Plan loan offset rollovers).

How long you have to complete the rollover depends on what kind of Plan loan offset you have. If you have a qualified plan loan offset, you will have until your tax return due date (including extensions) for the tax year during which the offset occurs to complete your rollover. A qualified plan loan offset occurs when a Plan loan in good standing is offset because your Plan terminates, or because you sever from employment. If your Plan loan offset occurs for any other reason, then you have 60 days from the date the offset occurs to complete your rollover.

If you were born on or before January 1, 1936

If you were born on or before January 1, 1936 and receive a lump sum distribution that you do not roll over, special rules for calculating the amount of the tax on the payment might apply to you. For more information, see IRS Publication 575, Pension and Annuity Income.

If you roll over your payment to a Roth IRA

If you roll over a payment from the Plan to a Roth IRA, a special rule applies under which the amount of the payment rolled over will be taxed. However, the 10% additional income tax on early distributions will not apply (unless you take the amount rolled over out of the Roth IRA within 5 years, counting from January 1 of the year of the rollover).

If you roll over the payment to a Roth IRA, later payments from the Roth IRA that are qualified distributions will not be taxed (including earnings after the rollover). A qualified distribution from a Roth IRA is a payment made after you are age 59½ (or after your death or disability, or as a qualified first-time home buyer distribution of up to $10,000) and after you have had a Roth IRA for at least 5 years. In applying this 5-year rule, you count from January 1 of the year for which your first contribution was made to a Roth IRA. Payments from the Roth IRA that are not qualified distributions will be taxed to the extent of earnings after the rollover, including the 10% additional income tax on early distributions (unless an exception applies). You do not have to take required minimum distributions from a Roth IRA during your lifetime. For more information, see IRS Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs) and IRS Publication 590-B, Distributions fi·om Individual Retirement Arrangements (IRAs). You cannot roll over a payment from the Plan to a designated Roth account in an employer plan.

If you are not a Plan Participant

Payments after the Participant’s death. If you receive a distribution after the Pmiicipant’s death that you do not roll over, the distribution will generally be taxed in the same manner described elsewhere on this page. But, the 10% additional tax on early distributions does not apply, and the special rule described under the section “If you were born on or before January 1, 1936” applies only if the Participant was born on or before January 1, 1936.

If you are a surviving spouse

If you receive a payment from the Plan as the surviving spouse of a deceased Pmiicipant, you have the same rollover options that the Participant would have had, as described elsewhere in this notice. In addition, if you choose to do a rollover to an IRA, you may treat the IRA as your own or as an inherited IRA. An IRA you treat as your own is treated like any other IRA of yours, so that payments made to you before you are age 59½ will be subject to the 10% additional income tax on early distributions (unless one of the exceptions listed above applies) and required minimum distributions from your IRA do not have to start until after you are age 70½.

If you treat the IRA as an inherited IRA, payments from the IRA will not be subject to the 10% additional income tax on early distributions. If, however, the Participant had stmied taking required minimum distributions, you will have to receive required minimum distributions from the inherited IRA. If the Participant had not started taking required minimum distributions from the Plan, you will not have to start receiving required minimum distributions from the inherited IRA until the year the Pmiicipant reaches the Required Minimum Distribution (“RMD”) Age. The RMD age is as follows: born on or before 6/30/49, the RMD age is 70-1/2; born between 7/1/49-12/31/50, the RMD age is 72; born on or after 1/1/52, the RMD is 73. Thus, if you attained age 72 before January 1, 2023 ( and after December 31, 2020), the RMD is age 72. If you attain age 72 after December 31, 2022 and will attain age 73 before January 1, 2033, your RMD is age 73.

If you are a surviving beneficiary other than a spouse

If you receive a payment from the Plan because of the Participant’s death and you are a designated beneficiary other than a surviving spouse, the only rollover option you have is to do a direct rollover to an inherited IRA. Payments from the inherited IRA will not be subject to the 10% additional income tax on early distributions. You will have to receive required minimum distributions from the inherited IRA.

Payments under a qualified domestic relations order

If you are the spouse or former spouse of the Participant who receives a payment from the Plan under a qualified domestic relations order (QDRO), you generally have the same options and the same tax treatment that the Participant would have (for example, you may roll over the payment to your own IRA or an eligible employer plan that will accept it). However, payments under the QDRO will not be subject to the 10% additional income tax on early distributions.

If you are a nonresident alien

If you are a nomesident alien and you do not do a direct rollover to a U.S. IRA or U.S. employer plan, instead of withholding 20%, the Plan is generally required to withhold 30% of the payment for federal income taxes. If the amount withheld exceeds the amount of tax you owe (as may happen if you do a 60-day rollover), you may request an income tax refund by filing Form 1040NR and attaching your Form 1042-S. See Fmm W-8BEN for claiming that you are entitled to a reduced rate of withholding under an income tax treaty. For more information, see also IRS Publication 519, US. Tax Guide for Aliens, and IRS Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities.

Other special rules

If a payment is one in a series of payments for less than 10 years, your choice whether to make a direct rollover will apply to all later payments in the series (unless you make a different choice for later payments).

If your payments for the year are less than $200 (not including payments from a designated Roth account in the Plan), the Plan is not required to allow you to do a direct rollover and is not required to withhold federal income taxes. However, you may do a 60-day rollover.

Unless you elect otherwise, a mandatory cashout of more than $1,000 will be directly rolled over to an IRA chosen by the Plan administrator or the payor. A mandatory cashout is a payment from a plan to a Participant made before age 62 (or normal retirement age, iflater) and without consent, where the Participant’s benefit does not exceed $5,000 (not including any amounts held under the plan as a result of a prior rollover made to the plan).

You may have special rollover rights if you recently served in the U.S. Armed Forces. For more information, see IRS Publication 3, Armed Forces’ Tax Guide. You also may have special rollover rights if you were affected by a federally declared disaster ( or similar event), of if you received a distribution on account of a disaster. For more information on special rollover rights related to disaster relief, see the IRS website at www.irs.gov.