FAQs
You can roll you money over to another retirement plan, to an IRA, or you can take a cash distribution. If your company’s plan is not a qualified plan, such as a deferred compensation plan, or if it is a 457 plan or 403(b) plan, there may be other rules regarding the payment or rollover of your money.
If you roll your money into another plan or to an IRA there are no taxes or penalties. If you take a cash distribution 20% will be withheld for federal taxes and 4% for state taxes for residents of Virginia. If you are under age 59½, and you take a cash distribution, there is a 10% penalty paid to the IRS when you file your tax return. The federal and state taxes that are withheld are the IRS and State of Virginia required withholdings and may not represent the amount you may actually owe when you complete your tax return.
In some divorce cases, the court will award some or all of a retirement account’s assets to the participant’s ex-spouse. If this is done, the court order must meet the conditions of a Qualified Domestic Relations Order (QDRO) as stipulated by the IRS and the U.S. Department of Labor. If the court order does not meet all of the requirements for a QDRO, the plan is prohibited from paying plan benefits to anyone other than the plan participant.
Your retirement benefits will go to the beneficiary or beneficiaries you named on the beneficiary form you completed when you signed up for the program. If you didn’t list any beneficiaries, the assets will be counted as general assets of your estate. If you have a will or living trust describing how your estate should be distributed, the retirement plan benefits would then be distributed along with your other estate assets according to those documents. If you don’t have a will, your assets are distributed according to the laws of the state in which you live.