Belgarath Posted January 2, 2023 Share Posted January 2, 2023 I think I know the answer, but thought I'd solicit opinions. Suppose you have a state where state withholding is NOT mandatory - let's use NY as an example. Can a plan refuse to do state withholding on a taxable distribution, since it isn't required, even if the participant WANTS to have state tax withheld? I know that many platforms will accommodate the request, but I believe it is not required. Thoughts? Thanks, and Happy New Year! Link to comment Share on other sites More sharing options...
Peter Gulia Posted January 3, 2023 Share Posted January 3, 2023 I’m not aware of anything in title I of the Employee Retirement Income Security Act of 1974 that requires a retirement plan’s administrator or trustee to provide a distributee the convenience of withholding for a State’s income tax. However, if a plan’s practice is not to withhold for State income tax unless law that governs the payer compels withholding, the plan’s administrator might consider whether a summary plan description and forms for requesting a distribution should furnish this information. Beyond the disclosures, notices, account statements, and reports that ERISA, by statute or a rule, requires, a fiduciary has duties to communicate further information a prudent fiduciary should know someone needs to protect his or her interests in the plan. A plan’s administrator must communicate with no less “care, skill, prudence, and diligence” than a prudent person who is experienced in administering a similar retirement plan would use. Luke Bailey 1 Peter Gulia PC Fiduciary Guidance Counsel Philadelphia, Pennsylvania 215-732-1552 Peter@FiduciaryGuidanceCounsel.com Link to comment Share on other sites More sharing options...
Belgarath Posted January 3, 2023 Author Share Posted January 3, 2023 Thanks Peter. Link to comment Share on other sites More sharing options...
Luke Bailey Posted January 5, 2023 Share Posted January 5, 2023 Belgarath, you might check (unless you have already) whether, although withholding is not mandatory, NY requires that the employee be provided a withholding election. Luke Bailey Senior Counsel Clark Hill PLC 214-651-4572 (O) | LBailey@clarkhill.com 2600 Dallas Parkway Suite 600 Frisco, TX 75034 Link to comment Share on other sites More sharing options...
Belgarath Posted January 6, 2023 Author Share Posted January 6, 2023 Good point. Does anyone doing a lot of NY business happen to know the answer to this? (This really comes up in the context of a plan using brokerage accounts - the recordkeeping platforms do their thing anyway so it isn't an issue on those, but the brokerage firms don't do a darned thing, so this becomes an issue.) Link to comment Share on other sites More sharing options...
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