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If I take lump sum from 401k will my ui be reduced In mass,

Customer Question
Good morning. If I...

Good morning. If I take lump sum from 401k will my ui be reduced In mass

Accountant's Assistant: Thanks. Can you give me any more details about your issue?

Just started receiving full payment of 720 per week , wanted to make 401k withdrawal to pay mortgage 50000

Submitted: 2 years ago.Category: Tax
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2/18/2016
Tax Professional: Robin D., Senior Tax Advisor 4 replied 2 years ago
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 17,854
Experience: 15years with H & R Block. Divisional leader, Instructor
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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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Tax Professional: Robin D., Senior Tax Advisor 4 replied 2 years ago

Please respond below

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Customer reply replied 2 years 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
Tax Professional: Robin D., Senior Tax Advisor 4 replied 2 years 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

I know rating takes an additional step and I truly appreciate it when you take the extra time!

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Tax Professional: Robin D., Senior Tax Advisor 4 replied 2 years ago

I hope that clarified for you.

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Tax Professional: Robin D., Senior Tax Advisor 4 replied 2 years ago

Just checking back

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Customer reply replied 2 years 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.
Tax Professional: Robin D., Senior Tax Advisor 4 replied 2 years ago

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

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Customer reply replied 2 years ago
this was an employer plan contributed by both me and my prior employeer
Tax Professional: Robin D., Senior Tax Advisor 4 replied 2 years ago

Then Mass will reduce by a portion.

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