Benefit recipients may now complete the federal Form W-4P, Withholding Certificate for Pension or Annuity Payments, online by logging in to their Member Access account. The IRS mandated the use of the Form W-4P for making federal tax withholding elections for periodic monthly benefits effective January 1, 2023.
In 2021, the IRS announced changes to the default withholding rate for monthly retirement benefit payments. Effective January 1, 2023, the default withholding rate became single with no allowances (exemptions) for new payees or payees making a change to their withholding. As part of this change, the IRS released a revised federal tax withholding election Form W-4P, Withholding Certificate for Pension or Annuity Payments, and a new Form W-4R, Withholding Certificate for Nonperiodic Payments and Eligible Rollover Distributions.
Please note that PEBA’s Withholding Certificate for Monthly Benefit Payments (Form 7202) may still be used by members to update or change South Carolina withholding allowances.