Pension Fund lawsuit

Forum|Forum|1 year ago
January 20, 2025
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I won a summary judgement for a relatively small Pension because the Fund neglected to change to 5-year minimum vesting by the required legal date. They may settle with a lump sum buyout. Is it all taxable?

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DianeW777

Perhaps. If you contributed only 'pre-tax' funds to the pension fund, then all of the lump sum buyout will be taxable. Likewise, if your employer paid all of the funds into the plan, and those funds weren't part of your taxable income on your W-2, all of it would be taxable.

If any contribution to the plan were 'after-tax' funds then none of it would be taxable or the 'after-tax' portion of the funds wouldn't be taxable when distributed through the buyout.

NOTE: If you are allowed and you roll the funds over to a retirement account, they won't be taxed until withdrawn. Also, if damages become part of the lawsuit, that portion may be treated differently.

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