Fidelity would have no idea what the tax would be on your 401k withdrawal. It depends on family size, other income, your deductions, etc, etc, etc. That is why you do a final reporting and reconciliation by filing an annual income tax return.
So, in anticipation that your taxes may go up due to the 401k withdrawal, the government has them withhold part of the distribution for income taxes, just like from your regular paycheck. Under certain conditions, you have the option to decline withholding, at your own risk. At the end of the year, you may owe more, or may have overpaid and get a refund.
