The distribution must be reported under the general rule method. because you cannot recover the contributions in 3 years or there was not employer contribution. Under NJ Publication GIT - 1, you must divide the contributions by the total expected return on contract(contributions). NJ also refers you to IRS Publication 939 "General Rule for Pensions and Annuities". All I got from that publication is that the recipient should live for another 25 years through the Actuarial tables. How do you figure the expected return so that you can figure the excludable portion of the distribution and the taxable amount?