[[Some time soon, I will have to take possession of a hundred thousand or so in
deferred retirement. My state has notified me that when I withdraw the funds
they may be "turned over" into an account governed by the above rules rather
then taking cash. I'm guessing it is similar to a 401(k) (or a 403(b) which I also
have). ]]

Instead of going directly to the code Jack, I would recommend that you do some reading written in more simple terms.

What you are really talking about is taking your retirement distribution and "rolling" it over to an IRA account. That would make the distribution tax free, and you would only be taxed on the distributions that you take from the IRA. And your distributions would be governed by the IRA rules.

So, that being the case, I would suggest that you wander over to the IRS web site and read IRS Publication 590. That Pub will give you all of the options and will give you information on how you'll eventually be taxed on the funds when they are removed from the IRA account. What IRC 402(c)(8) really deals with are rollovers via "trustee to trustee" transfers. And you'll read all about trustee to trustee transfers in IRS Publication 590.

Once you have read IRS Pub 590, if you have any specific questions, I'll be glad to answer them here.

TMF Taxes
Roy

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