Updated October 7, 2026. Quick answer: Mostly on request, but not for a big withdrawal. Since January 1, 2025 “new legislation no longer requires payers to withhold income tax” from certain retirement distributions, yet “Payers are still required to withhold income tax from lump sum distributions”, defined on Form CT-W4P as any distribution greater than $5,000 or more than 50% of the account balance, whichever is less.
Drawing a pension? Whether the state withholds tax from it, from its own documents: Connecticut tax withholding on pension payments.
Connecticut withholding at a glance
| Item | What the documents say |
|---|---|
| Is it required? | Only for a lump sum distribution (greater than $5,000 or more than 50% of the account balance, whichever is less); otherwise the payee may request it |
| Rate or amount | 6.99% on a lump sum when no properly completed Form CT-W4P is given; a requested amount follows the form’s withholding code |
| How to start or stop it | Form CT-W4P, given to the payer; Withholding Code E on line 1 gives $0 withholding |
| Direct rollover | Not withheld on a lump sum that is a trustee-to-trustee transfer or a direct rollover payable to another qualified account |
| Changed for 2026? | The change took effect January 1, 2025; the form archived is Rev. 12/24 and no 2026 change is stated |
What the Connecticut documents say
Form CT-W4P, the Withholding Certificate for Pension or Annuity Payments, opens with the 2025 change: “new legislation no longer requires payers to withhold income tax” from certain retirement income distributions. Payees can still ask for withholding by completing the form.
Large withdrawals are the exception. The form says “Payers are still required to withhold income tax from lump sum distributions”, and for those it says that “will result in 6.99% withholding from your payment(s)” if you fail to give the payer a properly completed form. To avoid withholding on a lump sum, the form says to enter Withholding Code E on line 1, which results in $0.00 withholding.
A $50,000 withdrawal: cash in hand or a direct rollover
Take a $50,000 401(k) withdrawal paid to you. The IRS says a taxable eligible rollover distribution paid to you from an employer plan is subject to “mandatory income tax withholding (generally at a rate of 20%)”, which on $50,000 is $10,000 (computed as $50,000 times 20%) held back for federal tax. At $50,000 it is a lump sum under the form’s test: it is greater than $5,000, and the test turns on whichever of its two limits is lower. With no properly completed CT-W4P the payer withholds 6.99%: $3,495 (computed as $50,000 times 6.99%) for Connecticut. Entering Withholding Code E on line 1 would make that $0.
The other path is a direct rollover to an IRA or another plan. For federal tax the IRS says “The mandatory withholding doesn’t apply in a direct rollover”. Connecticut agrees on the state side for lump sums: the form says withholding is required unless the distribution “is a trustee-to-trustee transfer or is a direct roll over” made payable to another qualified account. Amounts that were already taxed, such as a distribution from a Roth 401(k) or Roth IRA, are also outside the lump sum rule.
What a mover should know
This page is about Connecticut as a state of residence. An instruction line written for a nonresident or part-year filer is not the rule for a resident, and none of the documents read settles a part-year or two-state case, so check each state’s own rule. The federal side is the same everywhere; CMG’s federal 20% withholding on a pension lump sum page covers it, and state withholding on retirement withdrawals lists the other states checked.
What the documents do not say
- The form archived is Rev. 12/24; the documents read cite no Connecticut General Statutes section and describe no 2026 change.
Common mistakes
- Assuming Connecticut stopped withholding on every distribution in 2025; the form still requires it on lump sums.
- Giving the CT-W4P to the Department of Revenue Services; the form says to submit it to the payer of your pension or annuity.
- Assuming the answer for one state applies to another, or that state withholding settles the state tax owed at filing.
Related: state withholding on retirement withdrawals, how Connecticut taxes 401(k) and IRA withdrawals, Connecticut retirement taxes, and retirement withholding calculator.
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Answer againSources
- Form CT-W4P, Withholding Certificate for Pension or Annuity Payments (Rev. 12/24), with instructions: https://osc.ct.gov/wp-content/uploads/2023/08/CT-W4P_2025.pdf
- IRS Tax Topic 413, Rollovers from retirement plans: https://www.irs.gov/taxtopics/tc413
Sources: the primary documents linked above, read on October 7, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.