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Stale dated checks - Form 5500


EMoney

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We're seeing more stale dated checks being re-deposited by recordkeepers into plans--typically to an unallocated cash account or the forfeiture account. How are others reporting these on the 5500 filings? Obviously the checks have been shown as distributions in prior years.

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I have shown it in the past as a type of other income on the Sch H.   I don't like netting with current distributions but not sure I could point to anything hard to cite. 

 

I don't see a reason to amend prior filings.  You legit though the money was out of the plan.   As a rule I don't see plans carry a liability on the books until the check clears the recordkeeper's system.  

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5 hours ago, EMoney said:

Thanks, Bird. We've certainly considered that but have run into the situation of no other distributions that year. A negative distribution didn't make sense to us.

Understood.  I would not amend a prior return.  Maybe call it a rollover...?

Ed Snyder

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1 minute ago, Bird said:

Maybe call it a rollover...?

How do you account for the distribution after it is rolled over? Ignore it because you already reported it once?  Only report earnings on the "rollover"? report it again?

Not trying to shoot you down, just trying to work out what the practical implications of the workaround would be, assuming you don't want amend any prior reporting (5500, 8955, 1099,945)

From a reporting perspective, Im not sure you can apply constructive receipt to every situation, so you may need to amend 1099s at least.

 

 

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1 hour ago, RatherBeGolfing said:

How do you account for the distribution after it is rolled over? Ignore it because you already reported it once?  Only report earnings on the "rollover"? report it again?

Not trying to shoot you down, just trying to work out what the practical implications of the workaround would be, assuming you don't want amend any prior reporting (5500, 8955, 1099,945)

From a reporting perspective, Im not sure you can apply constructive receipt to every situation, so you may need to amend 1099s at least.

Honestly, I'd have to either look at how we've done it before.  Certainly if we control things (i.e. prepare 1099s) we would not issue a new 1099-R if one was done previously.  If it's on a platform and the money has gone back into a participant's account then that proves more difficult.

At some point we make it up as we go along and do what seems appropriate given the situation.

 

Ed Snyder

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Thanks to all who replied. Your thoughts make me feel better in that we're not missing something obvious. I think Bird's comment about doing what seems appropriate given the situation probably makes the most sense unless we get some direction. We've considered "other contribution" whether it's on a Schedule H or an SF (which is similar to what ESOP guy suggested and what Bird suggested)--it seems reasonable and defensible in an audit. If the distribution is ultimately made, we can report it again. In the event of an audit, I wouldn't feel terribly stupid telling an auditor what we did and why we did it. Admittedly the 1099-R's would not match up to the 5500 but we could explain that.

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10 hours ago, EMoney said:

Thanks to all who replied. Your thoughts make me feel better in that we're not missing something obvious. I think Bird's comment about doing what seems appropriate given the situation probably makes the most sense unless we get some direction. We've considered "other contribution" whether it's on a Schedule H or an SF (which is similar to what ESOP guy suggested and what Bird suggested)--it seems reasonable and defensible in an audit. If the distribution is ultimately made, we can report it again. In the event of an audit, I wouldn't feel terribly stupid telling an auditor what we did and why we did it. Admittedly the 1099-R's would not match up to the 5500 but we could explain that.

Just to be clear I do not use "other contribution" but other income- line 2(c) on the Sch H.  I don't think this is a type of contribution or rollover.  I don't file that many SFs. 

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1 hour ago, ESOP Guy said:

Just to be clear I do not use "other contribution" but other income- line 2(c) on the Sch H.  I don't think this is a type of contribution or rollover.  I don't file that many SFs. 

Understood. I thought it was a similar line of thinking, though. While I don't disagree with you, it doesn't seem like it would be considered income either.

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1 hour ago, BG5150 said:

So how do you show it when it goes back out? Negative 'Other Income'?

It can't be a distribution.  It's already been claimed as much.

It has been a while but it would be a distribution or other income.  I would guess distribution is most likely. 

 

In this regard I am with Bird it is clear there is too much over thinking of it is going.  

 

Have you ever had an IRS agent who is auditing the 5500 get into the details of the Sch H this much?  I haven't and I could easily explain what these amounts are.   It could be because I deal with mostly larger plans- my smallest plan has 70 people but my largest has over 20k employees and most have over 500, these amounts are immaterial.   So I just don't see a need to sweat it as hard as some seem to do. 

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