withholding on annuity payments.

[himt4]

In a DB plan that pays out monthly annuities to its retirees, I know that withholding tax is not mandatory. However, often the retirees will request withholding. If the plan does not want to be bothered with withholding, can the Plan document be written, and the Plan administered so that it does not do any withholding for monthly annuity payments, even when the participant requests it?

[J2D2]

In a word - no. My recollection is that, in the case of annuity payments, federal income tax withholding is required, but that the recipient may waive withholding.

[david rigby]

Correct. Note that if no withholding choice is submitted (that is, form W-4P, http://www.irs.gov/pub/irs-pdf/fw4p.pdf), there is a default to assume "Married with 3 withholding allowances". Using 2005 tables, the result is zero withholding if the monthly amount is less than about $1500.

[Lori Friedman]

Agreed. Under I.R.C. Sec. 3405, withholding is required on the taxable portion of a distribution, unless the recipient elects not to have withholding apply.

[himt4]

Thanks all for the info. I was glad I was able to ask a question where everyone could agree on the answer.

[Guest smstls]

And don't forgot about state tax withholdings. Each state has its own set of rules, some do not permit withholding, some require withholding to follow the fed, etc.

[Guest Nautical]

We had a similar problem as well. If a participant wants tax withheld it is married and 3 exemptions on all of our election forms. State tax is a bigger issue because each state has its own rules. For example sometimes it is a flat dollar amount, sometimes it is a percentage, etc. State tax is what takes up most of our time