Chartered Retirement Planning Counselor (CRPC) Practice Exam 2025 – Comprehensive All-in-One Guide for Exam Success!

Question: 1 / 660

What percentage must a qualified plan withhold from distributions that are going to be rolled over within 60 days?

10%

15%

20%

For distributions that are eligible for rollover to another qualified plan, the IRS mandates that a certain percentage must be withheld for federal income tax unless the distribution is directly rolled over. In the case of indirect rollovers, where the participant receives a distribution and then deposits it into another qualified plan within 60 days, the withholding requirement is set at 20%. This withholding helps ensure that taxes are collected on distributions that might otherwise be omitted if the individual fails to complete the rollover within the specified timeframe.

While there are lower rates of withholding applicable in other circumstances, such as 10% in some cases for certain retirement accounts, the 20% withholding applies specifically to taxable distributions that are not directly rolled over. It serves as a precautionary measure to account for the taxes that will be owed on the distribution if it is not rolled over as intended.

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