Treating lump-sum retirement-plan distributions as if they occurred over a five- or ten-year period. Forward averaging is available only to qualified plan participants who were born before 1936 and meet certain requirements.
This treatment results in the distributions being taxed at a lower rate than the individual's ordinary tax rate.

To be eligible for the capital gains and forward averaging treatment, qualified plan distributions must be in the form of a lump-sum distribution.

Note: The five-year income averaging is repealed for taxable years beginning on or after January 1, 2000.