If Lisa elects to take a distribution from her 401(k) due to an outstanding plan loan, what is her mandatory withholding?

When a participant in a 401(k) plan, such as Lisa, elects to take a distribution due to an outstanding plan loan, the amount that is subject to mandatory withholding is generally calculated based on the total distribution amount. The Internal Revenue Service (IRS) mandates that for eligible rollover distributions that are not directly rolled over into another qualified plan or IRA, 20% must be withheld for federal income taxes.

In this scenario, if we assume that the total distribution amount is $9,000, then the calculation of the mandatory withholding would be 20% of that amount:

0.20 × $9,000 = $1,800.

Therefore, the correct choice reflects the federal withholding amount based on the total distribution from Lisa's 401(k) plan. It is essential to understand that in these situations, withholding is a critical aspect of the distribution that helps ensure the individual meets their tax obligations upon retirement plan withdrawals.