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@Pammie57,The plan administrator is the responsible withholding party. The IRS can recover the withholding , with interest, from the withholding party. The IRS will most likely not take any action if the tax liability is actually paid by the recipient of the distribution. If the participant does not pay the taxes owed, the IRS can recover from withholding party. The 1099-R should reflect what actually happened. If no withholding was done, you report no withholding.

Bah humbug. Thought you were sick of those puzzles. But a very Blessed Merry Christmas to all A late Hanakkuh to others and to the rest who don't fit either of those, I still wish God's peace on all.

100% off the top. It does not make sense to tax someone on money they never got. Doctrine of "Constructive receipt" applies in my opinion, which states that you should only be taxed if you receive the money. Similarly, I personally cannot stand when a recordkeeper rolls up the loan fee into the loan balance. $5,000 loan, person gets a check for $4,900. You're making them pay interest on the loan fee, and taxes if they default? That's not right.

That is up to ERISA counsel.