Updated October 16, 2026. Quick answer: Not required. Kentucky’s employer withholding instructions list pensions as “Pensions Not Required”, and answer that “Kentucky tax may be withheld voluntarily”, but is not required.
Kentucky pension withholding at a glance
| Item | What the documents say |
|---|---|
| Is state withholding required on regular pension payments? | No. Kentucky does not require withholding on pensions; tax may be withheld voluntarily |
| Default rate if you give the payer no form | None stated for pensions |
| Lump sum or one-time payment | The instructions list retirement plan (401K) payments as not required, with no separate lump-sum rule |
| Form to start, change or stop it | No pension-payee certificate named in the documents read |
| Changed for 2026? | No change stated; the instructions read were revised in October 2025 |
What the Kentucky documents say
Kentucky’s Department of Revenue publishes the instructions for employers as Withholding Kentucky Income Tax (42A003). They ask the question “Is Kentucky tax required to be withheld on pensions?” and answer that pensions are not required to be withheld, while tax may be withheld voluntarily.
The same table lists a retirement or 401(k) plan payment as “Retirement and Pension Plans (401K Plan) Not Required”.
What a mover should know
This page is about Kentucky 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 Kentucky covers the account side, and state withholding on retirement withdrawals lists the other states checked.
What the documents do not say
- The instructions read are written for employers. They name Form K-4 (42A804) only for employees, so no document read says how a pension payee starts or stops voluntary withholding, and no default rate is stated for pensions.
Common mistakes
- Assuming the payer is withholding for the state because it withholds for the IRS: Kentucky does not require withholding on pensions, and the documents read do not say how a pension payee asks for voluntary withholding, so ask the payer.
- 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 Kentucky, Kentucky retirement taxes, whether Kentucky taxes pensions, state withholding on retirement withdrawals, and retirement withholding calculator.
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Answer againSources
- Withholding Kentucky Income Tax Instructions for Employers (42A003): https://revenue.ky.gov/Forms/42A003.pdf
- 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.