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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
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Experience:  15years with H & R Block. Divisional leader, Instructor
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If I take lump sum from 401k will my ui be reduced In mass,

Customer Question

Good morning. If I take lump sum from 401k will my ui be reduced In mass
JA: Thanks. Can you give me any more details about your issue?
Customer: Just started receiving full payment of 720 per week , wanted to make 401k withdrawal to pay mortgage 50000
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Submitted: 9 months ago.
Category: Tax
Expert:  Robin D. replied 9 months ago.

Hello

Although severance payments are required to be reported (they are looked at as wages) pension distributions are not.

You can see in the following that 401k is not considered wages

http://www.mass.gov/lwd/unemployment-insur/resources/regulations/for-businesses/dua-definition-of-wages-mgl-chapter-151a.html

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Expert:  Robin D. replied 9 months ago.

Please respond below

Customer: replied 9 months ago.
Hello. Is an early withdrawal of 401k considered income by unemployment it is not normal distribution im taking but early withdrawal of prior employees plan thank you sheera
Expert:  Robin D. replied 9 months ago.

That is a distribution form a retirement account and it is not wages. It does not matter if it is an early distribution or made when you are at retirement age. Not income for UI

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Expert:  Robin D. replied 9 months ago.

I hope that clarified for you.

Expert:  Robin D. replied 9 months ago.

Just checking back

Customer: replied 9 months ago.
hi robin,
I'm confused. I found the following information on another site. it looks like I will receive no ui if I withdrew 50,000Lump-Sum DistributionsIf you close the 401(k) account and take a lump-sum distribution, Massachusetts will subtract a pro-rated amount (again, at 50 percent of the total withdrawal) through the remaining period of your unemployment eligibility. If you have 10 weeks of unemployment remaining, for example, the state applies the offset to 10 percent of the distribution amount. If you find a job before all of the lump-sum distribution has been offset, the state may claim an overpayment. You will have to reimburse the balance, either all at once or through an installment agreement.
Expert:  Robin D. replied 9 months ago.

If you made all the contributions then the reduction would not be enforce.

Customer: replied 9 months ago.
this was an employer plan contributed by both me and my prior employeer
Expert:  Robin D. replied 9 months ago.

Then Mass will reduce by a portion.

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