Nonperiodic Distribution
A nonperiodic distribution is a one-time, lump-sum payment of a qualified retirement plan distribution. **SIMPLE IRA plan**: These are tax-favored retirement plans that small employers, including self-employed individuals, can set up for the benefit of their employees, a SIMPLE IRA plan is a written salary reduction agreement between employee and employer that allows the employee, if eligible, to choose to have the employer contribute the salary reductions to a SIMPLE IRA on the employee's behalf. Even if an employer does not want to adopt a retirement plan, it can allow its employees to contribute to an IRA through payroll deductions, providing a simple and direct way for eligible employees to save. **Salary Reduction Simplified Employee Pension (SARSEP)**: This is a simplified employee pension (SEP) set up before 1997 that includes a salary reduction arrangement. Instead of establishing a profit-sharing or money purchase plan with a trust, employers can adopt a SEP agreement and make contributions directly to an individual retirement account or an individual retirement annuity established for each eligible employee. Instead of establishing a separate retirement plan, in a SARSEP, employers make contributions to their own IRA and the IRAs of their employees, subject to certain percentages of pay and dollar limits.
What Is a Nonperiodic Distribution?
A nonperiodic distribution is a one-time, lump-sum payment of a qualified retirement plan distribution.
How Nonperiodic Distribution Works
Only taxable distributions that are taken in cash are subject to the withholding tax in nonperiodic distributions. The withholding rule is intended to discourage employees from withdrawing their retirement assets before they are retired. Periodic distributions would instead be paid monthly or annually.
Nonperiodic distributions paid directly to an employee may be subject to a 10% early-withdrawal penalty and any owed withholding tax unless the beneficiary elects to have no taxes withheld. Nonperiodic distributions do not include individual retirement account (IRA) transfers or rollovers, systematic withdrawals, or required minimum distributions (RMDs). A nonperiodic distribution may also be taken out penalty-free for certain qualified expenses, such as purchasing a first home.
Types of Retirement Accounts
Below are several types of retirement accounts:
Related terms:
401(k) Plan : How It Works & Limits
A 401(k) plan is a tax-advantaged retirement account offered by many employers. There are two basic types—traditional and Roth. read more
403(b) Plan
A 403(b) plan is similar to a 401(k) but is designed for certain employees of public schools and tax-exempt organizations among other differences. read more
408(k) Plan
A 408(k) account is an employer-sponsored, retirement savings plan similar to but less complex than a 401(k). read more
Defined-Benefit Plan
A defined-benefit plan is an employer-sponsored retirement plan where benefits are calculated on factors such as salary history and duration of employment. read more
Defined-Contribution Plan
A defined-contribution plan is a retirement plan in which employees contribute part of their paychecks to an account intended to fund their retirements. read more
Distribution
Distributions are payments that derive from a designated account, such as income generated from a pension, retirement account, or trust fund. read more
Employee Contribution Plan
An employee contribution plan is an employer-sponsored savings plan where employees can save a portion of each paycheck in an investment account. read more
Excess Accumulation Penalty
The excess accumulation penalty is due to the IRS when a retirement account owner fails to withdraw the required minimum amount for the year. read more
Individual Retirement Account (IRA)
An individual retirement account (IRA) is a savings plan with tax advantages that individuals can use to invest for retirement. read more
IRS Publication 575
IRS Publication 575 is the document that provides the details on how to report income from pensions and annuities on a tax return. read more