When Benefits Are Paid and Taxed

Payments from 401(k) plans are generally referred to as “distributions.” You are eligible for a distribution from the Plan when you leave MPTN for any reason, become totally and permanently disabled, or die.

As a terminated team member you can continue to leave your funds in the Plan if your vested balance is more than $1,000 and can decide on how it is invested. The $1,000 threshold is applied separately to pre-tax and Roth after-tax monies. This option to leave your funds in the Plan is subject to federal minimum required distributions rules which are described below.

How Benefits Are Paid and Taxed

The form of distribution payment in the Plan is made in cash.

Consult Your Tax Advisor

Because tax consequences largely depend on your personal situation, you should consult a tax advisor about the effects of a distribution. You may also want to talk to a Merrill Lynch Retirement Education Specialist at their toll-free number, 1-877-637-1786.

If You Terminate Employment

Should you decide to “cash out” your money from the Plan when you leave MPTN, you will be subject to a mandatory 20% federal income tax withholding for the taxable portion of your distribution. You will also owe a 10% early withdrawal penalty if you are under age 55 when you leave. However, rolling a taxable distribution into an IRA or another qualified plan that accepts rollovers will allow you to defer taxes and avoid penalties. Remember, you can choose to leave all your funds in the Plan or take full or partial distributions at any time and can decide on how it is invested. However, if your balance is $1,000 or less, you will be required to take a full withdrawal. The $1,000 threshold is applied separately to pre-tax and Roth after-tax monies. Funds left in the Plan are subject to federal minimum required distributions rules described below.

If You Become Totally and Permanently Disabled

You are eligible to receive a cash distribution from the Plan when you become totally and permanently disabled. Human Resources will need to be provided with documentation from the Social Security Administration confirming your situation.

Should you decide to take a distribution from the Plan, you will be subject to a mandatory 20% federal income tax withholding for the taxable portion of your distribution, unless your money is directly rolled over into an IRA or another qualified plan that accepts rollovers. The 10% early withdrawal penalty will not apply as a result of your total and permanent disability. You will also have a non-forfeitable interest in the entire amount of your account balance.

Remember, you can choose to leave all your funds in the Plan or take full or partial distributions at any time and can decide on how it is invested. However, if your balance is $1,000 or less, you will be required to take a full withdrawal. The $1,000 threshold is applied separately to pre-tax and Roth after-tax monies. Funds left in the Plan are subject to federal minimum required distributions rules described below.

Minimum Required Distributions at Age 72 When You Terminate Employment

After you terminate employment with MPTN, unless you direct a total distribution, distribution of the account will be automatically deferred. However, you are required to receive minimum required distributions (MRDs) for your lifetime beginning not later than April 1 of the year following the year you reach age 72. Merrill Lynch will automatically calculate the MRD amounts for you based on the vested account balance and your life expectancy, and the distribution will be made automatically and proportionately across all investments and sources.

MRDs are not rollover-eligible distributions. Thus, they are subject to 10% federal income tax withholding, unless you elect another percentage or opt out of withholding entirely.

Death Benefits

Your beneficiary is entitled to receive a cash distribution of your entire account balance. You become fully vested in your account when you die regardless of your years of service.

When a distribution is made to your spouse on account of your death, it will be subject to a mandatory 20% federal tax withholding for the taxable portion of the distribution, unless directly rolled over into an IRA or another qualified plan that accepts rollovers. Similarly, non-spousal beneficiaries are subject to this same withholding rule for the taxable portion of the distribution, unless the distribution is directly rolled over into an Inherited IRA. The 10% early withdrawal penalty does not apply to beneficiaries — spousal or non-spousal.

Your beneficiary can choose to leave the funds in the Plan and can decide how it is invested. Funds left in the Plan, however, are subject to certain federal distribution rules. These rules will vary based on whether the spouse is the beneficiary and whether your death occurs before or after you were required to begin minimum required distributions described below.

Minimum Required Distributions for Beneficiaries

The federally required distribution rules for beneficiaries is dependent on the participant’s date of death and the type of beneficiary. The SECURE Act changed these rules for beneficiaries of participants with a date of death after December 31, 2019. This change in the rules is summarized below where the participant’s date of death occurred after December 31, 2019. Beneficiaries of participants who died prior to January 1, 2020 are subject to the prior rules.

If You Die Before Minimum Required Distributions Have Begun

If you die before minimum required distributions have begun (generally, before you reach age 72), distributions to your beneficiary will basically be as follows:

If you designated a non-spousal beneficiary, he or she must withdraw all funds from the Plan no later than December 31 of the calendar year that includes the tenth anniversary of your death (no partial distributions are allowed), unless your non-spousal beneficiary opts for minimum required distributions. Should your non-spousal beneficiary decide to keep his or her funds in the Plan in response to a communication from Merrill Lynch, minimum required amounts will be withdrawn automatically from the account annually. The minimum amount of the payments will be determined based on your vested account balance and your beneficiary’s life expectancy.
Distributions would begin by December 31of the year following the year of your death and continue for your beneficiary’s life expectancy, unless a full distribution of the remaining account balance is requested. Your non-spousal beneficiary may also have the option to make a direct rollover into an “Inherited IRA” instead of receiving minimum required distributions from the Plan.
If your beneficiary is your spouse, withdrawals may begin on any date that your spouse initiates a distribution (partial distributions are allowed). If a balance remains in the Plan, however, a minimum required distribution will commence by December 31 of the year in which you would have attained age 72. The minimum amount of the payments to your spouse will be determined based on the same rules that would have applied to you but will be based on the life expectancy of your spouse.
If there is no spouse or designated non-spousal beneficiary, payments will be made to certain descendants (that is, surviving children, or if not, surviving grandchildren in that line of specific lineage), or if there are none, to your estate and will be completed by December 31 of the calendar year that includes the fifth anniversary of your death.

If You Die After Minimum Required Distributions Have Begun

If you die after minimum required distributions have begun (generally, beginning in the year you reach 72), distributions to your beneficiary will be as follows:

If you designated a non-spousal beneficiary, your annual minimum required distribution must be paid as if you were alive in the year of your death. Distributions may be taken over the life expectancy of your beneficiary, if elected by the end of the year following your death. Otherwise, your beneficiary must receive a total distribution by the end of the year containing the 10th anniversary of your death.
If your beneficiary is your spouse, your annual minimum required distributions must be paid as if you were alive in the year of your death. By December 31 of the year following the year you died, your spouse must begin to take minimum required distributions based on their life expectancy. Otherwise, your spouse must receive a total distribution by the end of the year containing the 10th anniversary of your death.
If there is no spouse or designated non-spousal beneficiary, your annual minimum required distributions will continue to your estate over the number of years remaining in your original life expectancy.

Special rules apply if the beneficiary is more than 10 years younger than you.

An affirmative designation of your spouse as the beneficiary is automatically revoked effective as of the date on which a final divorce decree or judgment is entered by a court dissolving the marriage of you and your spouse.

Avoid Taxes with Rollovers

Rolling your taxable money into an Individual Retirement Account (IRA) or another qualified plan that accepts rollovers lets you defer taxes and avoid penalties. To request a rollover, contact the Merrill Lynch Participant Service Center at 1-800-228-4015.

Rollover of Distributions

You may roll over your distribution from the MPT 401(k) Retirement Plan into an IRA or another employer’s qualified plan. Rolling over your taxable distribution allows you to continue deferring taxes. (Keep in mind, though, that if you only roll over a portion of your taxable distribution, the amount not rolled over is taxed accordingly. Generally, you have 60 days after receiving your distribution to roll it over into another qualified plan. However, you should check with the plan receiving the rollover for specific details about how rollovers are handled.

There are two ways you can make a rollover to another qualified plan.

As a Direct Rollover: Your distribution check would be made payable directly to your IRA or, if you choose, another employer’s qualified plan.
As an Indirect Rollover: Your distribution check would be made payable directly to you and you would receive only 80% of your taxable distribution because the Plan is required to withhold 20% of the payment and send it to the IRS as income tax withholding to be credited toward your taxes.

You can roll over the payment made payable to you by paying it to your IRA or to another qualified plan that accepts rollovers within 60 days of receiving the payment.

If you want to roll over 100% of the payment to an IRA or another qualified plan, you must find other money to replace the 20% that was withheld. If you roll over only the 80% that you received, you will be taxed on the 20% that is withheld and not rolled over.

There are two ways to process your distribution request:

By contacting Merrill Lynch at 1-800-228-4015 and speaking to a Participant Services Representative, or
By accessing Benefits OnLine at www.benefits.ml.com.

Roth After-Tax Distributions

Because Roth 401(k) contributions are made on an after-tax basis, they are not taxable on distribution. Earnings on Roth 401(k) contributions are also exempt from income taxation on distribution if you satisfy two “qualifying” requirements: (1) you take a distribution from your Roth 401(k) source after you reach age 59-1/2, and (2) five years have passed since you made your first Roth 401(k) contribution to the Plan. You can avoid paying taxes on Roth 401(k) earnings not meeting these two requirements by rolling it over into a Roth IRA or other qualified employer plan that accepts Roth accounts.

Assignment of Benefits and Qualified Domestic Relations Orders (QDROs)

Your benefits under the Plan are solely for you (or your beneficiary). Generally, they cannot be assigned to anyone else and are not subject to garnishment or attachment. However, the Plan will honor Qualified Domestic Relations Orders (QDROs) issued by a court that recognizes the rights of another person under the Plan in situations, for example, involving a divorce settlement. QDRO payments are subject to a mandatory 20% federal tax withholding for the taxable portion of the payment, unless the former spouse, for example, directly rolls it over to an IRA or another qualified plan that accepts rollovers. QDRO payments are not subject to the 10% early withdrawal penalty.