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Tax Consequences
For more information on all of these guidelines, please refer to the plan's Special Tax Notice, which is available through the 401(k) Savings Plan Web Center.
You're also encouraged to consult with a professional tax advisor before electing to receive any payments from the plan because certain distributions may be eligible for favorable tax treatment. The overview provided in this document is not intended — nor should it be considered — as a substitute for professional advice.
Taxation of 401(k) Savings Plan benefits is complex and subject to frequent change. However, understanding taxation rules is very important because your decisions concerning payment of your account will affect your tax liability. Neither JPMorgan Chase nor its representatives can provide you with tax advice. Accordingly, it is strongly recommended that you seek the advice of a qualified tax expert and financial advisor before requesting a withdrawal or payment from the plan. This will help ensure that you receive the most updated information that applies to your own personal tax situation.
Tax Considerations of Contributions Made to the Plan
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Before-tax Contributions. You pay no federal income taxes or, in most cases, state and local income taxes on the before-tax contributions you make to the 401(k) Savings Plan until they are distributed to you (along with any associated investment earnings). However, Social Security and Medicare taxes are withheld from your contributions.
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Roth 401(k) Contributions. You pay federal, state, and local income taxes on the Roth 401(k) contributions you make to the 401(k) Savings Plan. As a result, your Roth 401(k) contributions will be distributed to you tax-free. In addition, any associated investment earnings on those Roth 401(k) contributions will also be distributed tax-free, as long as your distribution is a qualified distribution. (See "Roth 401(k) Qualified Distribution" for more information.)
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JPMorgan Chase Matching and Non-Matching Contributions. JPMorgan Chase will make matching contributions to the plan on behalf of eligible employees, and may make non-matching contributions on behalf of certain designated employees from time to time. These contributions, if any, will not be taxed at the time they are credited to your account. Instead, the company contributions, and any associated investment earnings, will be taxed as ordinary income at the time you withdraw them from the plan.
Tax Consequences of a Distribution Made Payable to Yourself
Certain individuals may receive a saver's credit of up to $1,000 (or $2,000 if filing jointly) for contributing to qualified tax-deferred retirement plans, such as the 401(k) Savings Plan. These income tax credits are limited to individuals whose adjusted gross income (AGI) is less than or equal to the following amounts: $53,000 for couples filing jointly; $39,750 for individuals who file as heads of household; and $26,500 for single taxpayers.
If you elect to have your account balance paid to you, the tax consequences are as follows:
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Taxable amounts, such as before-tax contributions, JPMorgan Chase matching and non-matching contributions, rollover contributions of before-tax amounts, and any associated investment earnings will be taxable as ordinary income. Mandatory 20% federal income tax will be withheld from your distribution, as will any applicable state tax withholding. A 10% early distribution penalty tax may also apply.
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Roth 401(k) contributions will be distributed tax-free. Any Roth 401(k) investment income will be distributed tax-free if your distribution is a qualified distribution (see "Roth 401(k) Qualified Distribution" for more information). Otherwise, associated investment income will be taxable as ordinary income, with mandatory 20% Federal Income Tax withheld from your distribution, as will any applicable state tax withholding. A 10% early distribution penalty tax may also apply to the distribution of any investment earnings.
Tax Consequences of a Rollover Distribution Made Payable to Another Institution
If you roll over your payment, you will continue to defer income taxes and will also avoid the early distribution penalty tax that may apply to your distribution.
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Taxable amounts, such as before-tax contributions, JPMorgan Chase matching and non-matching contributions, rollover contributions of before-tax amounts, and any associated investment earnings can be rolled over to a traditional Individual Retirement Account (IRA) or to another employer's qualified plan.
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Roth 401(k) amounts, both contributions and any associated investment earnings, can be rolled over to a Roth Individual Retirement Account (Roth IRA) or to another employer's qualified plan that accepts Roth 401(k) rollovers. (You should confirm with your new employer that the plan accepts Roth 401(k) rollovers prior to requesting this option.)
Please see " Rollovers" for more information on electing a rollover distribution. It is especially important for you to review this section as it relates to Roth 401(k) accounts.
Roth 401(k) Qualified Distribution
Your Roth 401(k) distribution will be a qualified distribution if:
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Your Roth 401(k) account has been in existence for at least five years. The five-year holding period begins with the first tax year for which you made a Roth 401(k) contribution to the plan and continues to run even if you stop making Roth 401(k) contributions; and
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Contributions and earnings are not withdrawn until you reach age 59-1/2, die, or become disabled.
JPMorgan Chase Common Stock
In certain circumstances, you may be able to reduce the amount of tax you owe as a result of a distribution from the plan. For instance, if you were age 50 prior to January 1, 1986, you may be entitled to have a lump-sum distribution taxed under 10-year forward averaging. Please see the plan's Special Tax Notice for more information.
If you elect to receive your JPMorgan Chase Common Stock Fund balance attributable to your non-Roth account in the form of shares of JPMorgan Chase common stock (rather than rolling it over), you may elect not to be taxed on any potential net unrealized appreciation on such stock (i.e., its increase in value while held in the plan) at the time the shares are distributed to you. Instead, you'll be taxed on the "cost" of such stock, and a subsequent sale of stock may result in capital gains treatment on any net unrealized appreciation. To use this special rule, the payment must either qualify as a lump sum distribution, or the JPMorgan Chase Common Stock included in the payment must be attributable to after-tax employee contributions, if any. For more information, please refer to the plan's Special Tax Notice which is available through the 401(k) Savings Plan Web Center and Call Center. You may also wish to consult a professional tax advisor.
Additional Income Tax
If you receive a payment before you reach age 59-1/2 and you don't roll it over, then in addition to the regular income tax, you may have to pay an extra tax equal to 10% of the taxable portion of the payment. The additional 10% tax does not apply if at least one of the following conditions is met. Your payment is:
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Paid to you because you terminate employment with your employer during or after the year you reach age 55;
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Paid because of a total and permanent disability;
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Paid to you as equal (or almost equal) payments over your life or life expectancy (or your and your beneficiaries' lives or life expectancies) of at least 10 or more years;
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Used to pay certain deductible medical expenses;
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Directly paid from the plan to the federal government to satisfy a federal income tax levy;
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Paid to your spouse or other beneficiary following your death;
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Paid to you after age 59-1/2, even if you're still working; or
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Paid to an alternate payee according to a qualified domestic relations order (QDRO).
In addition, if you've elected to receive quarterly cash distributions of JPMorgan Chase Common Stock Fund dividends, these payments are not subject to the additional 10% tax.
See IRS Form 5329 for more information on the additional 10% tax.
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