Taxes and Penalties
The taxable portion of Plan withdrawals and distributions is generally taxed as ordinary income in the year it is received. Further, withdrawals taken before age 59-1/2 may be subject to nondeductible penalty taxes, unless you qualify for an exemption.
The taxable portion of virtually all non-periodic Plan withdrawals (other than hardship withdrawals) is also subject to mandatory 20% federal withholding tax, unless you arrange to directly roll over the money into an IRA or to another qualified retirement plan.
Certain lump-sum distributions from the Plan may be eligible for special tax treatment if you meet age and participation requirements. If you were born before 1936, you may be eligible for ten-year forward income averaging when you retire if you take a total withdrawal of your account balance. If you think you may be eligible for forward income averaging, you should consult a tax advisor prior to retirement.
Your Plan withdrawals and distributions will be reported annually on Forms 1099-R, which are mailed in January following the year in which the distribution was paid. You are responsible for reporting the taxable amount as income when you file your income tax returns.
When you request a withdrawal or distribution from the Plan, you will receive tax information regarding your income tax liability. You should read this information carefully to understand your payment options and how the manner in which you elect to receive your distribution affects your taxes and tax withholding. If you choose to take a withdrawal or distribution, you are responsible for complying with Internal Revenue Code rules governing distributions from retirement plans and for any tax consequences, and are strongly encouraged to consult a tax advisor. The Plan Administrator is not responsible for advising participants as to the tax consequences of withdrawals or distributions.
Withdrawals of PG&E Corporation Stock
For any withdrawal of contributions and earnings you have invested in the PG&E Corporation Stock Fund, you may have the total amount converted to PG&E Corporation common stock or paid to you in cash. Withdrawals from all of the other investment funds must be taken in cash, unless you elect a direct rollover. If you want to receive PG&E Corporation stock instead of cash from such other funds, you may exchange all or a portion of your money in the other investment funds for units in the PG&E Corporation Stock Fund before taking the withdrawal.
If you withdraw PG&E Corporation stock, you will only be liable for income taxes on the cost basis of each unit. The cost basis is the average purchase price for all the units you own in the Fund. If you sell the withdrawn shares, you will be liable for income taxes on the difference between the cost basis of your units and the sale price. The income will be subject to the capital gains tax rate if you held the shares for at least one year before the sale.
Participants who are considered "affiliates" of PG&E Corporation may generally resell their shares of PG&E Corporation common stock in compliance with the Securities and Exchange Commission Rule 144.
Most taxable and non-taxable withdrawals and distributions from the Plan are eligible for direct rollover to an IRA or other qualified employer retirement plan that accepts rollovers. There are two types of rollovers – direct rollovers and indirect rollovers. A direct rollover is when the check for your Plan balance is payable directly to the receiving IRA or tax-qualified plan. If you choose a direct rollover of the taxable or non-taxable portion of a Plan distribution:
  • no taxes will be withheld when the distribution is paid;
  • the distribution will not be reported as taxable income; and
  • taxes will be deferred until you later withdraw the money from the IRA or recipient qualified employer plan.
An indirect rollover is when the check for your Plan balance is made payable to you, and you then deposit all or a portion of that amount in an IRA or qualified plan. If you request an indirect rollover, the Plan is required by law to withhold 20% of the taxable amount. When you file your income tax return for that year, you must report the total amount of the distribution, including the withheld tax. You will receive a credit for the tax withheld to help offset the income tax you owe for that year. If you take an indirect rollover, you have 60 days from the date that you receive the distribution to roll it over to an IRA, Roth IRA or other qualified plan. Also, if you roll over taxable amounts to a Roth IRA, you will be subject to income tax on those conversions.
Plan distributions that are not eligible for rollover include:
  • refunds of automatic enrollment contributions within 90 days of enrollment;
  • ESOP dividends;
  • loans treated as deemed distributions;
  • distributions that are part of a series of substantially equal payments made at least once a year over a period of your lifetime/life expectancy, your and your beneficiary's lifetimes/life expectancies, or 10 years or more;
  • minimum required distributions from the Plan;
  • hardship withdrawals; and
  • refunds of excess contributions.
Although PG&E Corporation stock may be an eligible rollover distribution from the Plan, some IRAs and qualified retirement plans may not accept rollovers of stock certificates. Before requesting a direct rollover of stock certificates, you must verify with the recipient IRA trustee or plan administrator that the IRA or plan will accept a direct rollover of stock certificates.
Early Distribution Penalties
In addition to being taxed as ordinary income, distributions taken before age 59-1/2 (early distributions) may be subject to nondeductible federal and state penalty taxes (currently a 10% federal and 2-1/2% California state tax; penalty taxes in other states may differ). Early distributions are exempt from the penalty taxes if made for one of the following reasons:
  • refunds of automatic enrollment contributions within 90 days of enrollment;
  • ESOP dividends;
  • loans treated as deemed distributions;
  • after termination of employment during or after the year in which you reach age 55;
  • on account of your permanent disability;
  • after termination of employment in a series of substantially equal periodic payments, based on your life expectancy, and continuing for at least five years or until age 59-1/2, whichever is later;
  • after qualified service as a reservist (those called to active duty for 180 or more days);
  • to cover unreimbursed medical expenses for you, your spouse, or dependents in excess of 7.5% of your adjusted gross income;
  • to an alternate payee under a Qualified Domestic Relations Order (QDRO) upon dissolution of marriage;
  • to roll over to an IRA or other qualified retirement plan either directly or within 60 days of receipt of the distribution; or
  • on account of your death.
The early withdrawal penalties also apply to all hardship distributions except for those taken for unreimbursed medical expenses to the extent that they exceed 7.5% of your adjusted gross income.
The Plan Administrator does not withhold or assess any early distribution penalties when a distribution is paid. If you are subject to the early distribution penalties, you are responsible for including the penalties when you file your income tax return.