DEFINITION of 'Nonperiodic Distribution'

A type of employee retirement-plan distribution that is not considered a periodic distribution. Periodic distributions would include monthly payments, while nonperiodic payments would be one-time lump-sum payments.

Nonperiodic distributions that are paid directly to the employee will be subject to a 10% withholding tax unless the beneficiary elects to have no taxes withheld.

BREAKING DOWN 'Nonperiodic Distribution'

Nonperiodic distributions do not include IRA transfers and/or rollovers, systematic withdrawals or required minimum distributions. Only taxable distributions that are taken in cash are subject to the withholding tax.

The withholding rule is intended to discourage employees from raiding their retirement assets before they are retired.

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