Distributions from the Plan that are not directly transferred to another tax-exempt plan or individual retirement account (IRA) are subject to 20% federal withholding tax (plus state withholding taxes), and then taxed in full on your tax return for the year in which you receive the distribution. A 10% penalty may apply to your distribution if is paid to you before you attain age 59½, though an exception may apply depending on the circumstances of your distribution. You may reduce or defer the tax due on your distribution by rolling all or a portion of it to an IRA or another tax qualified employer plan within 60 days of receiving the distribution. Hardship withdrawals, are not eligible for rollover.
You also may roll over any portion of your distribution directly from the Plan to a Roth IRA. You will owe income tax on the taxable portion of your rollover to a Roth IRA, though the 10% penalty tax will not apply. Also, the 20% withholding tax on a rollover to a Roth IRA will not apply, though you may wish to request that withholding be made on the taxable portion of your rollover.
When you receive a distribution, you will be provided a more detailed explanation of these tax and rollover rules. You may also want to consult with your tax advisor before taking a distribution.