A Special Summary and Forecast Of Federal and State Tax Developments
LUMP-SUM PENSION payouts would lose tax benefits under Reagan's plan.</br></br>Certain sums received in one year are taxed now as if payment were spread equally over 10 years and the recipient had no other income ("10-year forward averaging"); a payment derived from pre-1974 membership in a retirement plan may be taxed at lower capital-gain rates. Unrealized gain on an employer's securities included in the payment isn't taxed until the recipient sells them; then it is capital gain. All these breaks would end under the Reagan plan.</br></br>Present law encourages early withdrawals for non-retirement uses, the Treasury complains, while the proposals would promote tax-favored distribution throughout a full retirement period. Taxes still could be deferred by "rolling over" a lump sum into an individual retirement account or other qualified plan, it says; and for someone who turns 55 by Jan. 1, 1987, the repeal would be phased in over six years.</br></br>This would take away "flexibility that always has been part of private retirement plans," Samuel Murray of Arthur Andersen & Co., CPAs, says.</br></br>STRICTER PENSION RULES would apply to premature and minimum payments.