Pension and Annuity Changes Begin in January

After hearing concerns from constituents, I want to remind those of you receiving pension and annuity income distributions that a recent change in state law requires plan administrators to withhold state taxes from those payments.

With passage of Public Act 17-147, pension plan administrators or payers of pensions or annuities are now required to withhold income taxes from disbursements. Prior law allowed taxpayers to instruct their plan administrators to withhold the appropriate amount of tax but did not require they do so.  Taxpayers could choose to pay the full liability at the time they filed state income taxes.

Similar to choosing income withholding, Connecticut residents must file form CT-W4P indicating their pension and annuity withholding choices with their plan administrator otherwise the top level of 6.99% will be withheld. Differences between the amount of tax withheld and the amount actually due when filing state taxes will be assessed or returned to the taxpayer.

To be clear, this is not a new or increased tax on these payments.  

I recommend those who receive pension or annuity payments contact their plan administrator before January 1 to make certain they’re not subject to an improper amount of withholding.  Additionally, the Department of Revenue Services has updated their online taxpayer assistance information at www.ct.gov/DRS and will be available to answer questions by calling 1-860-297-5962.