February 22, 2023
Federal tax withholding adjustment to benefits
Retirees and PSPRS benefit recipients may have noticed a decrease in their federal tax withholding in January’s benefit payment.
PSPRS implemented system changes associated with a new IRS W-4P withholding form, which was made available in the Members Only portal beginning January 1, 2023.
When the system was updated for this new form, an incorrect tax table was referenced for the purpose of calculating federal tax withholding. This resulted in a lower tax withholding for January’s benefit payment.
PSPRS has identified and resolved the issue for February’s benefit payment. This will most likely, for many benefit recipients, result in a higher withholding amount in the February payment, but a lesser amount when compared to December’s withholding.
Members concerned with the withholding change should review their individual situation with their tax professional. Members may also want to consider updating their withholding status with the new W-4P. The new IRS form takes a more holistic approach for determining the correct tax withholding by factoring in other income sources in addition to your PSPRS benefit.