This notice contains important information you will need before you decide how to receive your lump sum benefit from the CWA/ITU Negotiated Pension Plan (the "Plan").  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.  This choice will affect the tax you owe.  Monthly pension payments are not eligible for rollover.

A rollover is a payment of your lump sum benefit to your qualifying individual retirement arrangement (IRA) or to another employer plan that accepts your rollover.  Your payment cannot be rolled over to a SIMPLE IRA or a Coverdell Education Savings Account (education IRA).  See special rules for rollover to a Roth IRA below.  An "eligible employer plan" includes a plan qualified under section 401(a) of the Internal Revenue Code, including a 401(k) plan, profit-sharing plan, defined benefit plan, stock bonus plan, and money purchase plan;  a 403(a) annuity plan; a 403(b) tax-sheltered annuity; and a governmental 457 plan.

If you choose a DIRECT ROLLOVER

• Your payment will not be taxed when paid (except to Roth IRA) and no income tax will be withheld.
• Your payment will be made directly to your qualifying IRA or employer plan that accepts your rollover.
• Your payment will be taxed when you take it out of the IRA (except Roth IRA) or employer plan, but the tax treatment may be different from this Plan.

• You will receive only 80% of the benefit amount, because the Plan 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.  Moreover, 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 within 60 days of receiving it.  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 Traditional IRA.  You can open an IRA to receive the direct rollover.  Contact the IRA sponsor (usually a financial institution) to find out how to have your payment made as a direct rollover.  If you are unsure of how to invest your money, you can temporarily establish an IRA to receive the payment.  However, you may wish to consider whether that IRA will allow you to later move all or part of your payment to another IRA without penalty or limitation.  See IRS Publication 590, Individual Retirement Arrangements, for more information (including limits on how often you can elect rollovers between IRAs).

Direct Rollover to Roth IRA.  You can choose to roll your entire distribution into a Roth IRA if your modified adjusted gross income does not exceed $100,000 and if you are not married filing separately.  The distribution is taxable to you in the year of the rollover, but avoids the 10% additional tax on early distributions noted on the reverse.  Subsequent distributions from the Roth IRA may be tax-free subject to applicable rules.

Direct Rollover To A Plan.  If your new employer has a plan, ask the plan administrator if it will accept your rollover and whether it has any restrictions on distributions of rollover amounts or spousal consent requirements.
 
 

Mandatory Income Tax Withholding.  The Plan is required by law to withhold 20% of the amount paid to you, which is sent to the IRS as federal income tax withholding.  For example, if your lump sum is $10,000, only $8,000 will be paid to you because the Plan must withhold $2,000.  However, you must report the full $10,000 as a payment from the Plan on your income tax return (unless you make a rollover within 60 days).  You will also report the $2,000 as tax withheld, and it will be credited against any income tax you owe for the year.

Sixty-Day Rollover Option.  You can still decide to roll over all or part of the distribution 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 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 rollover the entire $10,000.  To do this, you contribute the $8,000 received from the Plan and $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 contribute 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.)

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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