Lump Sum Distribution Law Law and Legal Definition

Lump sum distribution refers to a one-time payment of an amount otherwise subject to period payments, such as a cash award in a contest, investment proceeds or dispute settlement. A lump sum distribution may be the distribution or payment, within a single tax year, of an employee's entire balance from all of the employer's qualified plans of one kind (pension, profit-sharing, or stock bonus plans). If the employee has more than one account in any category, all must be distributed as a lump sum distribution in a single tax year.

Special tax computations are allowed for qualifying recipients of certain lump-sum distributions from retirement plans. You may be able to elect optional methods of figuring the tax on lump-sum distributions you received from a qualified retirement plan.