Have a publicly traded C Corp ESOP Plan that has been doing your regular run of the mill Dividend Pass through process for awhile now on their quarterly cash dividend. Was recently notified that last year they filed multiple 8937's and the dividends for the past year were actually Return of Capital Cash Dividends. Never had this occur in any of my C Corp Plans in 25+ years of ESOP Administration. What impact would this have on the Dividend Pass through process if any? Is this type of Dividend even eligible for the 404(k) deduction and to be passed through to participants?
Client is asking what our process would be to amend the 1099R's for 2023, given that Return of Capital Dividends are non-taxable and reduce basis I believe. 2024's tax history can still be modified at this point. The Dividends paid quarterly are well below the stock basis on file for each participant.
