What is the tax consequence for an employee who requests a direct distribution of her 401(k) and rolls it over into an IRA?

When an employee requests a direct distribution from their 401(k) plan and rolls it over into an IRA, the tax consequences are specific to the type of distribution. If the distribution is a direct rollover to an IRA, the amount is not subject to federal income tax withholding. This means that while the funds are moving from one tax-advantaged account (the 401(k)) to another (the IRA), the transaction does not trigger immediate income tax liabilities.

In a direct rollover situation, there is no tax withheld, as the funds are not technically "distributed" to the employee but instead transferred directly between accounts. This allows the employee to maintain the tax-deferred status of those funds without incurring penalties or taxes at the time of the rollover.

If the funds were distributed directly to the employee (without rolling over), then that could lead to tax withholding and potentially penalties if not rolled over within the required timeframe. However, since the query asks specifically about a direct rollover situation, the emphasis is on tax deferral rather than immediate taxation or penalties.