Distributions are subject to income taxes and potential penalties in the year in which they are paid. You may be able to defer taxes and avoid penalties by rolling over your distribution into an Individual Retirement Account (IRA) or a Roth IRA, to another 403(b) plan, to a governmental 457(b) plan, or to a 401(a) qualified employer plan in a direct rollover.

Refer to Additional Information on the next page for resources you should use before making a distribution decision.

Taxes

Taxes must be paid on plan distributions the year in which they are received. Most plan distributions are taxable as ordinary income. As required by the IRS, the investment company will withhold a percentage of the distribution for federal income tax, as follows:

• 10% for a financial hardship distribution unless you elect otherwise, or
• 20% for a plan distribution

This mandatory withholding applies to:

• Lump sum distributions greater than $200, and
• Annuities paid for less than 10 years

As a participant, you are responsible for all additional federal and state income taxes due in excess of the amount withheld.

Penalties on Distributions Made Before Age 59½

Distributions made before you reach age 59½ are subject to a 10% federal penalty tax in addition to income tax. This 10% penalty tax applies to all distributions made before you reach age 59½ unless one of several exceptions apply. Common exceptions include:

• You retire at age 55 or older
• The distribution is in the form of regular payments for life with payments based on your
  life expectancy
• The distribution is attributed to your permanent disability or death
• The distribution was used for tax-deductible medical expenses that exceed 7.5% of your adjusted gross income

Rolling Over a Distribution to Another Plan

You may defer income taxes – and avoid the 10% early distribution penalty tax – on your SCRP distribution by rolling over your distribution:

• Before withholding, into an Individual Retirement Account (IRA) or a Roth IRA,
• To another employer-sponsored 403(b) retirement plan or 401(a) retirement plan as long as the new employer’s plan accepts rollovers from other plans, or
• To an eligible government deferred compensation plan that accepts rollovers from other plans

A rollover must occur within 60 days of receipt of the distribution.

Additional Information

For more information on taxes, penalties and rollovers:

• Refer to the Stanford booklet When Your Employment Ends—Retirement in the Resource Library
• Visit the IRS at www.irs.gov
• Contact a tax advisor