Expert: Allen - 1/5/2007

Question
I have a pension with a company I no longer work for.  They said I could cash out on the pension, however did not tell me what the penalties are!  Would I still have the to pay the 10% penalty.  

Answer
The plan administrator should have provided you with a Tax Notice. That would explain the circumstances under which the 10% penalty tax applies to your plan.

In general, under most circumstances the 10% excise tax applies to all distributions received before you reach age 59 1/2. This is in addition to the federal and state income tax that must be paid on the distribution. If you transfer the money to an IRA you do not pay tax at this time. You only pay tax when the money is withdrawn. I strongly recommended that you transfer to an IRA rather than receive the account in cash.