Change in Amount of Federal Withholding Tax for Required Distributions

Participants in the NRECA-sponsored 401(k) Pension Plan receiving distribution payments have historically had 20% federal tax withheld. Per IRS rules, participants taking required minimum distributions can reduce their tax withholding rate to 10% until the minimum distribution has been met for the year.

A recent upgrade to the Omni system allows NRECA to apply different percentages of tax withholding based on whether a participant is receiving required minimum distributions. Effective with October payments, participants receiving payments to satisfy required minimum distribution rules will have a 10% federal withholding tax applied to distributions made to satisfy the required amount for that year. Subsequent distributions once the required distribution amount has been met for the year will have a 20% federal withholding tax applied. A participant may increase the amount of withholding tax above the required amount by sending a signed request to NRECA’s retirement plan distribution unit via mail or email.

Participants not eligible for required minimum distributions will continue to have their withdrawals taxed at the 20% withholding rate.

Participants currently receiving distributions to satisfy their required minimum distributions will be notified of the change in tax withholding amounts and provided the option to change that amount going forward.

Participants who have questions about this change or who would like to use a different withholding tax rate (if applicable), should contact NRECA’s retirement plan distribution team at 866.673.2299, option 5, then 4.