Updated October 7, 2026. Quick answer: Yes, up to 10%, unless you opt out. Oregon law says withholding from a one-time distribution “shall not exceed 10 percent of the amount of money” received, and an individual “may elect to have no withholding by a payer”.
Drawing a pension? Whether the state withholds tax from it, from its own documents: Oregon tax withholding on pension payments.
Oregon withholding at a glance
| Item | What the documents say |
|---|---|
| Is it required? | Yes unless the individual elects no withholding; electing no federal withholding is treated as electing no Oregon withholding |
| Rate or amount | For a nonperiodic distribution, an amount set by the Department, not more than 10 percent of the distribution; periodic payments are withheld as wages |
| How to start or stop it | Form OR-W-4 for pension, annuity or other periodic payments; a no-withholding election on an IRA, annuity or deferred compensation plan lasts until revoked in writing to the payer |
| Direct rollover | Not stated in the documents read |
| Changed for 2026? | The 2026 OR-W-4 instructions are Rev. 02-17-26; the documents describe no new pension rule |
What the Oregon documents say
ORS 316.189 is the statute. It says that “An individual may elect to have no withholding by a payer” and that an individual who elected no federal withholding is deemed to have elected no state withholding, unless the individual notifies the payer otherwise. For a nonperiodic distribution the payer withholds an amount the Department determines, and that amount “shall not exceed 10 percent of the amount of money” and the fair market value of other property received.
The 2026 Form OR-W-4 instructions confirm the federal link: “you’re automatically opted out of Oregon withholding also” if you opted out of federal withholding from a pension, annuity or other periodic payment.
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. Oregon’s cap on a one-time distribution is 10 percent, which here is at most $5,000 (computed as $50,000 times 10 percent); the Department sets the actual amount, and the documents read do not give it. If you elected no federal withholding, you are deemed to have elected none for Oregon.
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”. The Oregon documents read do not say how a direct rollover is treated for state withholding, so confirm it with the payer before choosing.
What a mover should know
This page is about Oregon 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 Department’s amount for a nonperiodic distribution is not in the documents read, so only the 10 percent cap is stated. The documents read do not address a direct rollover.
Common mistakes
- Reading the 10 percent cap as the rate; the statute makes it a maximum and leaves the amount to the Department.
- Opting out of federal withholding without knowing it also opts you out of Oregon withholding.
- 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 Oregon taxes 401(k) and IRA withdrawals, Oregon retirement taxes, and retirement withholding calculator.
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Answer againSources
- Oregon Revised Statutes Chapter 316, section 316.189 Withholding of state income taxes from certain periodic payments: https://www.oregonlegislature.gov/bills_laws/ors/ors316.html
- 2026 Form OR-W-4 Instructions (150-101-402-1, Rev. 02-17-26): https://www.oregon.gov/dor/forms/FormsPubs/form-or-W-4-instr_101-402-1_2026.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.