If you elect the BackDROP, you must complete and submit a BackDROP Distribution Form. You may receive your BackDROP distribution in one of three ways:

• Cash Option - If you elect the cash option, the distribution will be paid directly to you. MOSERS is required to withhold 20% of the payment and send it to the IRS as income tax withholding. The BackDROP distribution is considered taxable income for the year in which you receive the payment unless you roll it over to a traditional IRA or another eligible employer plan. You may be able to use special tax rules that could reduce the tax you owe.
  
  NOTE: If you receive a cash payment before you reach age 59 1/2 and you do not roll it over, you may have to pay a penalty equal to 10% of the taxable portion of the payment in addition to the regular income tax. Consult our Special Tax Notice brochure for a list of exceptions.

• Rollover Option - If you elect the rollover option, your payment will be made directly to a traditional individual retirement arrangement (traditional IRA), or if you choose, to another eligible employer plan that will accept your rollover. Your payment will not be taxed in the year of the rollover and no income tax will be withheld. The payment will be taxed when you take it out of the traditional IRA or the new eligible employer plan.
  
  
• Combination Cash and Rollover Option - If you elect this option, you may specify the amount of the distribution to be paid directly to you (less the required 20% income tax withholding). The remaining balance will be paid to a traditional IRA or another eligible employer plan.
  
  For a detailed explanation of the payment methods and tax consequences, please review our Special Tax Notice brochure, which is available on our web site (www.mosers.org). We recommend you contact a tax consultant or financial advisor before electing a payment method.
  
  
• Lump Sum Distribution
  If you elect the BackDROP, the lump sum payment will equal 90% of the Life Income Annuity amount you would have received between the BackDROP date and your actual retirement date. This includes any temporary benefits, cost-of-living allowances (COLAs), and other benefit increases.