This notice contains important information you will need before you decide how to receive your benefits from the CWA/ITU Negotiated Pension Plan (the “Plan”).
 

The distribution to you by this Plan is eligible for rollover if you are the Plan participant, the surviving spouse or the “alternate payee” under a “qualified domestic relations order”.  (A distribution of a death benefit to a non-spouse beneficiary is not eligible for rollover.)  You can have all or any portion of your payment either 1) PAID AS A “DIRECT ROLLOVER” that allows you to continue to postpone taxation of the benefit, or 2) PAID TO YOU.  A rollover is a payment of your Plan benefits to your qualifying individual retirement arrangement (IRA) or to another employer plan that accepts your rollover.  This choice will affect the tax you owe.
 

If you choose a DIRECT ROLLOVER

• Your payment will not be taxed when paid and no income tax will be withheld.
• Your payment will be made directly to your traditional IRA or, if you choose, to another employer plan that accepts your rollover.  Your Plan payment cannot be rolled over to a Roth IRA, a SIMPLE IRA, or a Coverdell Education Savings Account (Education IRA) because these are not traditional IRA’s. 
• Your payment will be taxed when you take it out of the traditional IRA or the eligible employer plan, but the tax treatment may be different from this Plan.  For example, you may not be eligible for the special tax treatment described later in this notice.

• You will receive only 80% of the benefit amount, because the Plan Administrator is required to withhold 20% and send it to the IRS for credit against your taxes.
• Your payment will be taxed in the year paid.  You may be able to use special tax rules that could reduce the tax you owe.  However, if you receive the payment before age 59½, you also may have to pay an additional 10% tax.
• You still can roll over the payment to your traditional IRA or to another employer plan within 60 days of receiving the payment.  The amount rolled over will not be taxed until you take it out of the IRA or employer plan.  However, if you want to roll over 100% of the payment, you must find other money to replace the 20% that was withheld.  If you roll over only the 80% that you received, you will be taxed on the 20% that was withheld and not rolled over.

Direct Rollover To a Plan.  If your new employer has a plan, ask the administrator of that plan if it will accept your rollover and whether it has any restrictions on distributions of rollover amounts or spousal consent requirements.  An eligible plan could be another defined benefit, a 401(k), a profit-sharing, a stock bonus, a money purchase, a Section 403(a) or (b) annuity, or a governmental 457 plan.

Required Minimum Payments.  Beginning when you reach age 70½ or retire, whichever is later, a certain portion of your payment cannot be rolled over because it is a “required minimum payment” that must be paid to you.  Special rules apply if you own 5% or more of your employer.

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 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 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 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 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 tax withholding.  Within 60 days after receiving the $8,000, you may roll over the entire $10,000.  To do this, you roll over the $8,000 received from the Plan and you use $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, and you may get a refund of the $2,000 withheld when you file your income tax return.  If, on the other hand, you roll over only $8,000, the $2,000 you did not roll over 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 59½.  If you receive payment before you reach 59½ and you do not roll it over, then, in addition to the regular income tax, you may have to pay an additional tax equal to 10% of the payment.  The additional 10% tax generally does not apply to your payment if it is (1) paid after you separate from service with your employer during or after the year you reach age 55, (2) paid because you retire due to qualifying disability, (3) paid directly to the government to satisfy a federal tax levy, or (4) paid to the extent you have deductible medical expenses.  Your payment also is not subject to the additional 10% tax if you are receiving a death benefit or are an alternate payee under a qualified domestic relations order, even if you are younger than age 59½.  See IRS Form 5329 for more information.

Special Tax Treatment If You Were Born Before January 1, 1936.  If your eligible lump sum distribution is not rolled over, it will be taxed in the year you receive it.  However, it may be eligible for special tax treatment described below if you have been a participant in the Plan for at least 5 years or are a surviving spouse or alternate payee.
 

Ten-Year Averaging.  If you (the Plan participant) were born before January 1, 1936, you can make a one-time election to figure the tax on the lump sum distribution by using “ten-year averaging” (using 1986 tax rates).  Ten-year averaging often reduces the tax you owe.
 

Capital Gain Treatment.  In addition, if you were born before January 1, 1936, you may elect to have the part of your lump sum distribution that is attributable to your pre-1974 participation in the Plan (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 you receive in that same year.  If you have previously rolled over a payment from the Plan (or certain other similar plans of the employer), you cannot use this special tax treatment for later payments from this Plan.  If you roll over your payment to an IRA, governmental 457 plan, or 403(b) tax-sheltered annuity, you will not be able to use this special tax treatment for later payments from that IRA, plan or annuity.  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.See IRS Form 4972, for more information on lump sum distributions and how you elect the special tax treatment.

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 a professional tax advisor before you take a payment of your benefits from the Plan.  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, on the IRS’s Internet Web site at www.irs.gov., or by calling 1-800-TAX-FORM.  If you have questions about this notice, you may contact the Plan Office.
 

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