Originally Posted by
MaddDogg
I emptied my OSP last year without having to pay any extra taxes. Here's how it works.
Suppose the value of your OSP is $150K and that $100K of it is money that you contributed to your OSP with after tax dollars. Let's suppose that the other $50K is gains due to your investment choices. You may withdraw all of the money that you contributed (the $100K) with no tax consequences. Vanguard will send you a check.
You can also roll the gains ($50K, in my example) into an IRA or leave it where it is. The penalties apply when you try to do something with the gains other than roll it over to another IRA.
This worked for calendar year 2010. It would be wise to call Vanguard and ask what the current rules are.
Thanks MaddDogg.
My situation is surprisingly similar to yours, except that I'm not going to be withdrawing everything from my account and the Vanguard rep I spoke with yesterday told me that the check that they would send me would represent a withdrawal of a combination of my original contriubutions (~2/3's) and my earnings (~1/3). He said I'd have to pay taxes on the earnings AND that an additional 10% penalty MIGHT apply. I'm thinking that he was simply quoting the part about the penalty straight from the plan rules (the same thing our Pilot Benefit Book says). From your post I'm thinking that no penalty would apply. It would, of course, be nice if I could just withdraw original contribution funds and leave the earnings in the account, defering the taxes until later.