Those details help clarify the nature of the distribution. There are two components to the money in the plan, the basis in non-elective deferred compensation contributed by the employer and the investment gains. I think it's possible that the two components are taxable in different states as I mentioned above, the basis in KY in and the gains in TN, but I can't be sure; I guess I really can't be of much help. Which state taxes which portion will be established by how the employer reports it on the W-2, so this is really a question for the employer.
