In 1993, Congress passed a mandatory withholding law. The law requires your plan administrator to keep 20% of all qualified plan distributions to pay federal income tax before distributing the remainder to you. There are, however, some exceptions to the mandatory withholding rule. For example, amounts that are transferred directly from the trustee of your retirement plan to a trustee of another plan or a custodian of an IRA are not subject to withholding (direct rollover).
Note: Plan administrators are required to notify you of the direct rollover option at least 30 days before the distribution is to take place.