Chapter 11: Pension Plan Distributions

01.Core Concepts

ROTH IRA: EXAMPLE 1 • Bob’ s qualified plan has a $250,000 account balance: • $200,000 pretax and $50,000 after-tax • Bob separates from service, receiving a distribution of $100,000. • Distribution - pretax amount = $80,000 ($100,000 x $200,000/$250,000). • Bob specifies that $70,000 is to be directly rolled over to his new qualified plan and that $30,000 is to be paid to Bob. Because the pretax amount exceeds the a mount directly rolled over, the amount directly rolled over to the new plan consists entirely of pretax amounts. • The amount paid to Bob (prior to application of withholding) consists of $10,000 in preta x amounts and $20,000 in after-tax amounts. Prior to the 60th day after th e distribution, Bob chooses to roll over $12,000 to an IRA. Because the amount rolle d over in the 60-day rollover exceeds the remaining pretax amounts, the amount rolle d over to the IRA consists of $10,000 of pretax amounts and $2,000 of after-t ax amounts.