Federal Income Tax Facts

When Your Investment Becomes Taxable

In general, your entire account (contributions and investment earnings) is taxable as ordinary income when it is distributed to you.

If you receive a single-sum distribution of the total balance in your account in a single calendar year after you reach age 59-1/2 (payable because you retire, separate from service, become totally and permanently disabled, or die), you may be eligible to elect a special lump sum tax treatment which may reduce the tax otherwise due on your distribution. However, this special tax treatment is being phased out and will generally not be available after 1999.

You may also choose to defer all or a part of the tax on your distribution by transferring all or part of the taxable portion of the distribution to an Individual Retirement Account ("IRA") or another tax-qualified plan within 60 days after you receive the distribution.

You have the right to tell the Plan to pay your distribution directly to the other plan or to your IRA, or you may ask that your distribution be paid directly to you. However, if the single sum is paid to you rather than deposited directly in another qualified plan or into an IRA, Federal law requires that the Plan withhold 20% of the taxable amount of any payment for federal income tax. While you can accomplish the rollover yourself, you will have to make up the 20% withheld or that portion of your distribution will be taxable even though the rest of the payment was rolled over. Additional Taxes on Early Distributions

You should be aware that when you receive a distribution, in addition to the usual Federal (and state) income tax, you may be liable for an additional 10% federal tax for "early withdrawal" which will be applicable to the taxable part of your distribution unless you satisfy one of the following conditions:

• you are age 59-1/2 or older, unless you retire under the early retirement provisions of the Steamfitters’ Industry Pension Plan.
• you use the money to pay medical expenses which are deductible on your income tax return (which means they exceed 7-1/2% of your adjusted gross income), or
• the Plan pays another person on your account as a result of a Qualified Domestic Relations Order (for example, if you get divorced and the court orders the Plan to pay your former spouse all or part of your Plan benefit).

You should contact a qualified tax advisor at the time of a distribution if you have any questions about which tax treatment is most favorable to you.