Church as Beneficiary

[Guest THess]

This is a question that was presented to me.

A participant in a 401(k) Plan dies. A church is the beneficiary. Do you withhold for federal income tax?

I have asked several people including an ERISA attorney. The votes were split down the middle.

[Guest Harry O]

The technical answer is yes but since the distribution is not an eligible rollover distribution the church can elect out of withholding. The end result is that the church gets the money with no withholding.

[mbozek]

I dont know who you asked but mandatory 20% witholding only applies if the distribution is eligible for a rollover. Otherwise only the 10% voluntary withholding is applicable and the church can waive that witholding.