Abby N

Just responding to bring to the top of the benefitslink mail box Any thoughts are appreciated!

Hi everyone, Came across an interesting one! Participant in a tax exempt 457(f) plan died and a portion of the benefit was previously included in the participant's income (i.e. the participant paid taxes for a portion of the benefit which vested in a prior year). Trustee says that the total amount distributed to the beneficiary, including the previously taxed amount, will be reported in Box 3 of 1099-Misc. I am familiar with the timing rules for reporting death benefits in the w-2 and 1099-Misc, and have thoroughly reviewed the 1099-Misc instructions. My questions are: Whether the trustee should be reporting the total distribution in Box 3 of the 1099-Misc, or just the taxable portion? If the trustee insists on reporting the total distribution (both taxable and non-taxable portion) in Box 3, how should the beneficiary avoid double taxation on the portion that was previously taxed? Should we provide some kind of statement to the beneficiary that includes the portion of the distribution that was previously taxed? Bonus question- any thoughts on how the beneficiary could have the previously taxed portion excluded from income when the beneficiary files their tax return? Thanks in advance!

An honor to be responding to THE cathyw! Now I just have to have a discussion with the Simpson's 3-eyed fish guy to have completed my benefitslink bingo card I think I dug into this a while ago and found it really vague but I believe the answer is yes. It's one of the reasons I recommend that non-gov 457(b) plans do not allow transfers in. Another tricky one is whether the right to defer also needs to carry over (ex. a plan permits one payment deferral but the prior plan allows 2 payment deferrals)

Thanks everyone for your response! Feels like an honor to have received responses from the benefitslink glitterati! Any thoughts on the basis (if any) that plans changed the definition of comp back in 2018 due to the disability claims procedures? I was rereading the 1.411(d)-4(d) regs and am wondering whether the definition of disability could be considered either an administrative procedure re the distribution of benefits or a right that is derived from administrative and operational provisions (I've copied the regs below)- any thoughts are appreciated and thanks again! (9) Administrative procedures for distributing benefits, such as provisions relating to the particular dates on which notices are given and by which elections must be made; and (10) Rights that derive from administrative and operational provisions, such as mechanical procedures for allocating investment experience among accounts in defined contribution plans.

Hi everyone, Any thoughts on if it is permissible to change the definition of disability in a DC plan, or would the definition of disability be considered a protected benefit subject to the anti-cutback rules? Does the answer change if the definition of disability is used as a distribution trigger or to provide for immediate vesting? I am aware that it's not uncommon for DC plans to be amended to change the definition of disability (ex. back in 2018 when the DOL issued the claims procedure regs requiring retirement plans to require adding disability claims procedures if the disability definition included some discretion) but have not been able to iron out whether this type of change is subject to the cutback rules. Thanks for the community's help!