MEDIA ADVISORY:

February 6, 2012

For more information contact: 202-724-8190 

Councilmember Michael A. Brown to correct mandatory retirement withholding

Washington, DC- 

This Tuesday, February 7, 2012, Councilmember Michael A. Brown will be introducing the “Targeted Retirement Distribution Withholding Amendment Act of 2012”.  This bill will amend chapter 18 of title 47 to limit the retirement distributions subject to mandatory tax withholding to only lump-sum distributions.  

As part of the Mayor’s FY2011 Budget Support Act, a provision was passed mandating that early distributions from retirement plans already subject to mandatory federal withholding would be required to also have DC taxes withheld at the highest income tax rate.  It was understood at the time that this would only affect a targeted group of retirees and was in response to the failure of many paying their taxes on an annual basis.  

Later, in December of 2011, the OCFO requested that the “RETIREMENT DISTRIBUTION WITHHOLDING EMERGENCY and TEMPORARY ACTS OF 2011” be passed, claiming that it was only making technical corrections to the code.  However, this bill in fact removed important language that has now led to far more retirees being hit with this withholding than was ever intended.  

Other than the simple cash flow concerns that this type of withholding would create, it has also been accurately described as a legally mandated zero interest loan coming from retirees on fixed incomes to the District government.  This is wrong and creates an unnecessary burden on our city’s eldest residents. Furthermore, it seems unfair that this withholding is being taken out at a marginal tax rate reserved only for those making over $350,000 a year, regardless of the retirees actual annual income.  This is why Councilmember Michael A. Brown will be correcting this unjust policy and why limiting the scope of individuals who this withholding will apply to is absolutely critical.