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PERAC Memo #23 - 2009: Update Federal Withholding Tables

Update Federal Withholding Tables

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Summary

Memorandum #23/2009 follows up on IRS Notice 1036-P, which supplements earlier federal withholding table updates addressed in Memo #19/2009. Boards must choose between (1) continuing to use the previously implemented "February tables," or (2) adopting an additional withholding adjustment based on payment frequency, marital status, and pension amount per Notice 1036-P—reverting to the old tables is not permitted. No specific deadline is set for adopting the second option, but boards should review the attached IRS Notice and Ice Miller E-Alert and select and implement one of the two compliant approaches.

Full Text

MEMORANDUM #23, 2009 M E M O R A N D U M TO: All Retirement Boards FROM: Joseph E. Connarton, Executive Director RE: Update Federal Withholding Tables DATE: May 28, 2009 On April 16, 2009, PERAC issued Memo #19/2009 advising that the IRS had promulgated new withholding tables. On May 14, 2009 the IRS issued additional guidance in IRS Notice 1036-P. PERAC’s Tax Counsel provided the attached GOVERNMENT PLAN E-ALERT outlining the Notice and describing the two options that public retirement boards can choose to comply with the Notice. Reverting to the old withholding tables is not an option. Instead, the Retirement Board should choose one of the following options:

  1. Continue to use the new withholding tables (called the February tables) that were described in PERAC Memo #19/2009. Since this table is already implemented and since in many Systems’ retirees have been advised about the effects, this course of action might be the easiest and least confusing.

  2. Adopt an additional withholding procedure that increases the withholding by a specified amount depending on the pensioner's payment frequency, marital status and pension amount (per the table in Notice 1036-P). No effective date for adoption of the additional withholding procedure has been set, but the IRS has encouraged plans that choose to adopt this new procedure to do so as soon as possible.
    Please review the attached Ice Miller E-ALERT and Notice 1036-P. If you have questions, please contact this office, and if necessary the Commission will seek additional advice from Ice Miller if necessary. Attachments