Updated October 16, 2026. Quick answer: Yes, unless you opt out. Michigan’s rule for pension administrators is that “Withholding is required on taxable pension benefits”, and a recipient can use Form MI W-4P to opt out.
More on public pension systems, topic by topic: Michigan MPSERS post-retirement increases, Michigan MPSERS working after retirement and Michigan MPSERS disability retirement.
Michigan pension withholding at a glance
| Item | What the documents say |
|---|---|
| Is state withholding required on regular pension payments? | Yes if your payer falls under Michigan taxing jurisdiction, unless you opt out on Form MI W-4P; a payer outside Michigan jurisdiction may withhold if you ask but is not required to |
| Default rate if you give the payer no form | With no MI W-4P, 4.25 percent is withheld for recipients born in 1946 or later; none is withheld for those born before 1946 unless benefits exceed the private pension limits |
| Lump sum or one-time payment | The documents read do not give a separate lump-sum rule |
| Form to start, change or stop it | Form MI W-4P, given to the pension or annuity administrator |
| Changed for 2026? | No change stated; Treasury gives the rate as 4.25 percent for 2025 |
What the Michigan documents say
Michigan Treasury tells pension administrators to “withhold on all taxable pension distributions at 4.25 percent”. For recipients born before 1946 the same page says: “Do not withhold on benefits paid to pension recipients born before 1946”, unless benefits exceed the private pension limits.
For the recipient, Treasury’s page says: “You have the option to opt out of withholding”. On Form MI W-4P, box 1 means no withholding and box 2 uses the withholding tables by exemptions; the page says “you may change your elections on the MI W-4P at any time”.
The authority Treasury cites is MCL 206.703(1).
What the printed rate means in dollars
For a pension of $2,000 a month with no MI W-4P on file and a recipient born in 1946 or later: 4.25 percent of $2,000 is $85 (computed as $2,000 times 4.25 percent).
These are illustrations of the rate the state document prints, not a prediction of how your payer will calculate or what you will owe at filing.
What a mover should know
This page is about Michigan 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, state tax withholding on IRA and 401(k) withdrawals in Michigan covers the account side, and state withholding on retirement withdrawals lists the other states checked.
What the documents do not say
- The documents read do not give a separate lump-sum rate. They say payments not reported in federal adjusted gross income, including rollovers not included in it, are not taxable in Michigan and are not subject to pension withholding. The rate is stated by Treasury for 2025.
Common mistakes
- Giving the payer a federal W-4P and assuming it also settles the state; check whether the state’s own form is needed.
- Assuming the answer for one state applies to another, or that state withholding settles the state tax owed at filing.
Related: state tax withholding on IRA and 401(k) withdrawals in Michigan, Michigan retirement taxes, whether Michigan taxes pensions, state withholding on retirement withdrawals, and retirement withholding calculator.
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Answer againSources
- Pension Administrators: https://www.michigan.gov/taxes/business-taxes/withholding/withholding-for-pension-administrators
- Withholding Requirements for Pension Recipients: https://www.michigan.gov/taxes/iit/tax-guidance/tax-situations/retirement-and-pension-benefits/pension/withholding-for-pension-recipients
- IRS Tax Topic 413, Rollovers from retirement plans: https://www.irs.gov/taxtopics/tc413
Sources: the primary documents linked above, read on October 16, 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.