Page 14 - Hess Pension 2017

Taking Care of Taxes
While it’s not possible to avoid them entirely, it’s important to understand what taxes you will owe on your pension bene t. And, if you take a lump-sum payment, you can take steps to avoid a 10 percent penalty tax.
The iRS considers pension bene t payments taxable income, regardless of whether you choose to receive a lump sum or monthly annuity payments.
■ Lump Sum — if you choose to receive your cash Accumulation Account in a lump sum, you will owe:
- Regular Income Tax: you will owe ordinary income tax on the full amount unless you choose to roll it over to an iRA or an eligible retirement plan willing to accept it. if you do not roll your lump sum over, Hess will withhold 20 percent for the ordinary income tax you owe.
- Early Distribution Penalty Tax: you will also owe a 10 percent penalty tax (in addition to ordinary income tax) if you receive your balance before age 591⁄2 (unless you are at least age 55 during the year you leave Hess) and don’t roll it over. Hess will not withhold the penalty tax; you will need to pay it when you le your tax return.
■ Annuity — if you choose to receive your cash Accumulation Account in a series of monthly payments, you will owe:
- Regular Income Tax: Hess will withhold income tax unless you elect otherwise. if you do not want taxes withheld from your monthly annuity payments, you must complete the appropriate form when you retire.
- Early Distribution Penalty Tax: you will also owe a 10 percent penalty tax (in addition to ordinary income tax) if you receive your balance before age 591⁄2 (unless you are at least age 55 during the year you leave Hess). Hess will not withhold the penalty tax; you will need to pay it when you le your tax return.
Because the tax laws for plans like this one are often complicated, consider contacting your tax or nancial advisor for more information.
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