re: Lump Sum Distribution of my Pension Benefit

If you choose to take the lump sum, you'll be taxed 20%, which should be taken off the top. If you are under 59 1/2, which i'm assuming you are, you'll be taxed another 10% that I believe you'll pay when you file your taxes. You should have been given some information that would explain what percentage they'll be withholding.

Companies can afford to offer these benefits mainly due to the amount of tax savings that they receive. I work in the Pension field and a large percentage of pension plans pay for 100% of the non-owner benefits in the tax savings alone. They end up being just a way for the owner to shelter money for themself.