mandatory 20% federal withholding tax on 457b ?

[bortman]

I'm 46 and preparing to leave my job in the next few months. I have a 457b from which I'm considering making as-needed lump-sum withdrawals, rather than rolling over into a tIRA and then pipelining into a Roth IRA.

One of the 457b provider's docs states: "A mandatory 20% federal withholding tax applies directly to distributions taken that could be eligible for a rollover."

Is the 20% withholding a tax penalty. i.e. if I request to withdraw $30k, I'll actually receive $24k and never be able to directly recoup any/all of the $6k tax withholding.

Or, does this mean that I can get some of that 20% back when I file my 2018 tax return since I expect to land in the 12% tax bracket? Will the 20% federal withholding be reported on a 1099-R in Box 4 as "Federal income tax withheld"? i.e. is it analogous to over-paying withholding on my weekly paycheck, then recouping some of that money after entering W-2 details on my tax return.

[terran]

You should check with the provider, but it sounds to me like they'll withhold the 20% and that will count against you tax liability when you file your taxes. So if you owe less you'll get it back, if you owe more you'll pay the difference.

[MDM]

...they'll withhold the 20% and that will count against you tax liability when you file your taxes. So if you owe less you'll get it back, if you owe more you'll pay the difference.

^It's this.

See page 8 of 2018 Publication 15-A - p15a.pdf.

[bortman]

Thanks!

JIC the link breaks later, from Publication 15-A for 2018, Section 8 Page 24:

Eligible Rollover Distribution—20% Withholding
Distributions from eligible retirement plans (other than IRAs), such as qualified plans, 401(k) plans, section 457(b) plans maintained by a governmental employer, section 403(a) annuity plans or section 403(b) tax-sheltered annuities that are eligible to be rolled over tax free to an IRA or another eligible retirement plan, are subject to a flat 20% withholding rate. The 20% withholding rate is required and a recipient can't choose to have less federal income tax withheld from eligible rollover distributions. However, you shouldn't withhold federal income tax if the entire distribution is transferred in a direct rollover to a traditional IRA or another eligible retirement plan.