Final answer:
SEP plan rollovers and Section 403(b) plan/TSA rollovers are generally not subject to the 20% federal income tax withholding when executed as direct transfers. But if the transfer is not direct, such as when funds are distributed to the participant before being rolled over, the mandatory withholding will apply.
Step-by-step explanation:
Among the options provided, the following is NOT subject to 20% mandatory federal income tax withholding if a rollover is not a direct transfer:
B) Section 403(b) plan/TSA rollovers
Under IRS regulations, if a distribution from an eligible retirement plan, such as a Simplified Employee Pension (SEP) plan, money purchase pension plan, or profit-sharing plan, is not directly transferred to another eligible retirement plan but instead sent to the participant (i.e., an indirect rollover), 20% mandatory federal income tax withholding applies. However, for Section 403(b) plan/Tax-Sheltered Annuity (TSA) rollovers, they are generally exempt from this 20% mandatory withholding tax if they are distributed in an indirect rollover scenario.