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100% this! Of course it is taxable. If there was no withholding you report no withholding. Lets go back to the ABCs of CRDs, ANY DISTRIBUTION (with a few exceptions like corrective distributions) can be a CRD. The 1099-R reports the transaction. The tax treatment of the distribution will be determined based on the taxpayer's filing of Form 8915-E. You can have a CRD from the plan with no withholding, but unless the taxpayer makes certain elections and files Form 8915-E, it is taxed like any other distribution. BTW, marking it with code 2 on the 1099-R will mean absolutely nothing unless the taxpayer also files Form 8915-E. And if they do file Form 8915-E, it doesn't matter if the 1099-R is coded as a 1 or a 2. Finally, imagine the following scenario: Taxpayer is a participant in two plans, and takes a $100,000 CRD with no withholding from each plan. Both plans have followed the rules, and will need to report the distributions accurately. Taxpayer can only treat $100,000 as CRD for preferential tax treatment, and treatment that treatment is entirely up to taxpayer. Why in the world would either plan report anything other than what happened?

Then he should have plenty of time to help us out here!

I have dealt with auditors on similar questions where the deferrals are sent to the recordkeeper/trustee, but not allocated until later. In each case, the auditors were satisfied that there were not late contributions that had to be disclosed on the Form 5500 (and in the financial statement schedules). If the TPA is not actually a trustee and the assets are not in trust -- you have a problem. Honestly, though, that problem would be with the way you have set the plan up.

Oh good for him!!

Not sure why anyone would think it is not taxable, and withholding would be whatever it was. My attitude is/was that once out the door, a CARES distribution was like any other distribution, and not our job to tell anyone it was qualified or not for tax purposes, just report it.

She terminated in 2020 so you only need to add back in the 2020 withdrawals to the TH test. The in-service add back is for active employees.

I find the question a bit confusing so I'll start with your last comment Austin. If you cherry pick the people in each component plan, the classifications are not reasonable, so each component plan must pass the ratio percentage test. Yes that is definitely true. Once you pass that hurdle, you test as if you have two separate plans, and if each rate group in each component does not pass 70% ratio percentage, you must proceed to the average benefits test just like you were testing any two separate plans that fail ratio/percentage but pass the NCT. Does his help?

All remarks here are off the top of my head with no further research, so take it with a healthy dose of skepticism... First, I believe the "less than 10 years younger" is referring to calculation of Required Minimum Distributions, not the calculation of a J & S payment of a defined benefit. Yes, I believe it is possible that it could affect the amount of payments. Now, it is possible that the amount was correctly calculated, and the payment is actually correct, but they just have a wrong DOB in their records somehow. But it it is also possible that the amount was incorrectly calculated based on the incorrect DOB, and that your father was overpaid for 30 years. The plan may attempt to recoup overpaid amounts by reducing future payments, for example. I'll defer to some of the DB experts (I am NOT one) and attorneys to flesh this out more with additional details and more informed opinions.

There have been informal comments by the IRS at industry conferences essentially saying, in the context of discussing BRFs of the available rates of elective deferrals, that there is no test on the definition of compensation used for elective deferrals. Just make sure the ADP test uses a 414(s) definition of compensation and that highly compensated employees are determined using a 414(q) definition of compensation.