Eligible rollover distribution (ERD)
Definition
A distribution that is eligible to be rolled over to an eligible retirement plan. Eligible rollover distributions include a participant’s balance in a qualified plan, 403(b) or 457(b) plan, except for certain amounts that include the following:
- Any of a series of substantially equal distributions paid at least once a year over:
- The participant’s lifetime or life expectancy,
- The joint lives or life expectancies of the participant and his/her beneficiary, or
- A period of 10 years or more,
- A required minimum distribution
- Hardship distributions,
- Corrective distributions of excess contributions or excess deferrals, and any income allocable to the excess, or of excess annual additions and any allocable gains
- A loan treated as a distribution because it does not satisfy certain requirements either when made or later (such as upon default), unless the participant's accrued benefits are reduced (offset) to repay the loan
- Dividends on employer securities, and
- The cost of life insurance coverage.
Referring Cite
IRC § 402(c)(2), IRC § 402(c)(4); Treas. Reg. §1.402(c)-2, Q&A-4
Additional Helpful Information
- Eligible rollover amounts that are processed as a direct rollover are not subject to withholding tax
- Eligible rollover amounts that are not processed as a direct rollover, must generally be rolled over within 60-days: that is assuming the participant wants to rollover the amount. But see
- Eligible rollover amounts that are not processed as a direct rollover are generally subject to a federal withholding tax of 20%. State tax withholding may also apply, depending on the State’s tax-withholding requirements
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