Your IPERS retirement benefit is subject to all applicable state and federal taxes. We will withhold taxes from your retirement benefit, per your direction.
Generally, all taxable amounts paid out as a lump sum are subject to a mandatory 20% federal withholding tax if not directly rolled over to an eligible retirement plan. If you are an Iowa resident, you will be subject to 5% withholding on the taxable portion, unless you qualify for an exemption (or make a rollover). The Iowa exemption is $6,000 for individuals, and not everyone is eligible. The IPERS refund application contains further details about the Iowa exemption. (Nonresidents may request Iowa withholding from a refund.)
If a member dies and the member’s spouse receives a lump-sum death benefit, the same federal and state withholding rules apply. Other beneficiaries may be able to exempt a portion from Iowa income taxes. All IPERS applications for lump-sum distribution include IPERS’ Special Tax Notice Regarding Plan Payments. Contact the Iowa Department of Revenue at tax.iowa.gov for more information.