Federal Income Tax Withholding On Benefits

The tax laws require that the Pension Plan withhold federal income tax from certain monthly benefits unless the Participant elects, in writing, not to have the tax withheld. The form of the benefit generally determines whether or not automatic withholding applies. However, if the Participant lives outside the United States or is a non-resident alien, different withholding rules may apply.

If benefits are paid in a lump sum or in fixed installments over a period of less than ten years, you may elect to directly transfer your payment(s) into a traditional Individual Retirement Account (IRA) or another qualified retirement plan. If your payments are not so directly transferred, the Plan is required to withhold 20% of the payment for taxes, even if you subsequently elect to roll them over to an IRA. If the payment is to your spouse or beneficiary, different withholding and rollover rules may apply.

Some Participants will not owe federal income tax on their pension benefits because the Participant’s total taxable income determines whether he or she must pay federal income tax.

At the time you retire, you will be given complete and detailed information about federal income tax withholding on your retirement benefits.