Keyword: 403(b) Pension Plan

This is archived information that pertains only to the 2005 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

Am I considered covered by an employer sponsored retirement plan for the year if I do not participate in the plan or if I did not work long enough to be vested?

The answer to this question depends on your type of retirement plan. Generally, if your employer's plan has a separate account for each employee, it is a defined contribution plan. If any amount was contributed or allocated by you or your employer to your account, you are considered covered. It does not matter if you have worked long enough to be vested.

In the other type of plan, a defined benefit plan, the employer must make enough contributions (together with earnings) to provide the retirement benefit promised in the retirement plan. In this type of plan, if you meet the minimum age and years of service requirements to participate in your employer's plan, you are considered covered. It does not matter if you are vested.

The Form W-2 (PDF) you receive from your employer has a box used to indicate whether you were covered for the year. The "Pension Plan" box should have a mark in it if you were covered.

I received a lump-sum distribution when I retired. Is there any special tax treatment on a lump-sum distribution?

You may be able to elect optional methods of figuring the tax on lump-sum distributions you received from a qualified retirement plan.

A lump-sum distribution is the distribution or payment, within a single tax year, of an employee's entire balance from all of the employer's qualified pension, profit-sharing, or stock bonus plans. The distribution must have been made under specific conditions. For details, refer to Tax Topic 412 which discusses Lump-Sum Distributions or Publication 575, Pension and Annuity Income.

How long do I have to roll over a retirement distribution?

You must complete the rollover by the 60th day following the day on which you receive the distribution. (This 60-day period is extended for the period during which the distribution is in a frozen deposit in a financial institution). The IRS may waive the 60 day requirement where failure to do so would be against equity or good conscience, such as in the event of a casualty, disaster, or other event beyond your reasonable control. To obtain the waiver in most cases, a request for a letter ruling must be made which include the applicable user fee. Refer to Internal Revenue Bulletin 2006-01 to get the Internal Revenue Procedure for requesting a letter ruling. A written explanation of rollover must be given to you by the issuer making the distribution. For information on distributions which qualify for rollover treatment, refer to Tax Topic 413, Rollovers from Retirement Plans. For information on the Direct Rollover Option, refer to Chapter 1 of Publication 590 , Individual Retirement Arrangements (IRA's).

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