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This thread from 2009, in which I participated, concludes with another poster calling the IRS and being told it is not reportable.

I hesitate to disagree with the Great and Powerful Larry Starr but something tells me that if you purchase an immediate annuity and the insurer is effectively taking on the liability of making payments, that there is no 1099-R reporting. I can say with some certainty that it is not a rollover, so that leaves the Q of exactly how to report it if indeed you have to - the full amount but $0 taxable?

Don't worry; it was a mistake and won't happen again. That employee has been terminated! With extreme prejudice!!!!!

To answer the question you asked, the answer is YOU BET THERE IS A CONCERN. Better answer: you can't do that.

I generally recommend the whole plan go to cash in a termination. For one thing, you have a constantly moving target if you don't, and for another, everyone will remember the losses that might occur after the decision is made but no one will remember the gains.

Hunter, I'll jump in on this to try to get the conversation started for you. There are some other threads in 401k Topics on this type of situation, so dig in and research what you can. I don't like entry defined as payroll period. It becomes messy. I prefer to say the employee becomes eligible 10/1 and each paycheck after 10/1 would have deferrals withheld. I think of this topic with this logic. When does the employee become a participant and when do they get paid. I don't normally chase the pay periods, because the pay periods get me to the questions you are asking. I want the w-2 as my best friend, so whatever is on the w-2 for deferrals is the total I want to use for the testing. Otherwise, I may be removing a payroll from the beginning of the year and adding a payroll at the end of the year. (or vice versa) I find this to be inefficient. How is the plan handling newly eligible and timing now? I think you would want to stay consistent. But to answer your direct question as you stated it. First date of entry payroll period was 10/27. The first date of check for this payroll period was 11/15. I would have payroll start withholding for the 11/15 paycheck. Others may have a different opinion and that's cool. I would just try to stay consistent in the process.

Not sure I would want to segregate pooled assets without an actual distribution request, and at that point I don't think it would be necessary.

It needs to run through the trust and he needs to receive a 1099-R. Ask the broker to put it in writing that he'll personally indemnify the Plan Sponsor for any all penalties that may arise from the Plan Sponsor Paying the participant directly outside the Plan. I'm not sure why it's a problem reopening the account but you can open an account in the name of the Plan anywhere and pay it out from there.

All distributions require a 1099R. And of course, the amount of the distribution is the amount of the distribution (out of the plan and TO the annuity carrier). Use the right code and all is fine.