University Of Michigan Benefits Office

Federal Income Tax

All income is eventually taxable. Retirement contributions that were made with tax-deferred dollars will be subject to Federal income tax requirements when you take a distribution from your account. Many people find it advantageous to postpone withdrawals until they retire because their income tax bracket is generally lower.

TIAA-CREF and Fidelity are required by federal regulations to withhold 20% from certain types of distributions. This is not a penalty; it is a federal income tax withholding at the time of distribution. When you file your taxes for the year, you may owe more or less, depending on your final tax liability.

The following types of distributions are subject to the mandatory 20% withholding:

Cash withdrawals (single sum, lump sum and systematic).

SRA Disability withdrawals.
TIAA Traditional Transfer Payout Annuity.
Fixed-period annuities of less than 10 years.
TIAA Traditional Interest Only payments.
TIAA-CREF Retirement Transition Benefit.

The following types of distributions are not subject to the mandatory 20% withholding:

TIAA-CREF lifetime annuities.
Fixed-period annuities of 10 years or longer.
SRA Hardship withdrawals.
Minimum distribution payments.

This information is based on the University’s current understanding of highly complex Internal Revenue Code (IRC) and U.S. Treasury Department regulations. It is provided for general informational purposes only. The University of Michigan does not provide tax advice. It is the responsibility of the plan participant to comply with federal tax regulations. Questions or concerns should be addressed to a qualified tax adviser.

Limitations
The University in its sole discretion may modify, amend, or terminate the benefits provided with respect to any individual receiving benefits, including active employees, retirees, and their spouses, partners, and dependents. Although the University has elected to provide these benefits this year, no individual has a vested right to any of the benefits provided. Nothing in these materials gives any individual the right to continued benefits beyond the time the University modifies, amends, or terminates the benefit. Anyone seeking or accepting any of the benefits provided will be deemed to have accepted the terms of the benefits programs and the University's right to modify, amend or terminate them.