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Showing results for tags 'nonperiodic payment'.
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In a governmental 401a defined benefit plan, each monthly annuity is paid in the month after it accrues (i.e. in February the member is paid the annuity amount accrued in January). When a member dies, say 15 days into a month, his or her designated beneficiary is entitled to a one-time, lump sum distribution of the deceased member's prorated annuity amount (i.e. those 15 days in the month of the member's death that they were alive and accrued an annuity amount). Is this prorated annuity amount paid upon the member's death considered an eligible rollover distribution or a nonperiodic payment? We are trying to determine whether we should apply the 20% federal withholding on ERDs or the 10% federal withholding on nonperiodic payments with an option for no withholding.