Harwood

Box 1 is the total amount of the distribution, taxable and non-taxable Box 2a is the taxable amount of the distribution. Reminder: "For reporting related social security and Medicare taxes on a governmental section 457(B) plan distribution, see the 2002 Instructions for Forms W-2 and W-3."

I called the IRS "Information Reporting Call Site" at (866) 455-7438. A researcher there was well aware of the issue. She said to use " code 7 - Normal Distribution" on a 1099-R when reporting a 457(B) governmental plan distribution [unless the 457(B) money has been commingled with money from a qualified plan or IRA]. She also quoted the 1099-R instructions: "Generally, use Code 7 if no other code applies." Personally, I hope the 2003 1099-R Instructions will give us explicit written instructions on this issue.

From Publication 571 "Tax-Sheltered Annuity Programs . . ." "Qualified Domestic Relations Order. You may be able to roll over tax free all or any part of an eligible rollover distribution from a 403(B) plan that you receive under a qualified domestic relations order (QDRO). If you receive the interest in the 403(B) plan as an employee’s spouse or former spouse under a QDRO, all of the rollover rules apply to you as if you were the employee."

The California Employment Development Department tells employers who ask to use $10,500 for the 401(k) limit for purposes of California Income Tax withholding and reporting in 2002.

402(g)(5) says that "The Secretary shall adjust the $7,000 amount under paragraph (1) at the same time and in the same manner as under section 415(d) . . ." 415(d)(1) states "The Secretary shall adjust annually . . ." 1.415-5(a)(1) has "the annual adjustment factor is to be determined by the Commissioner . . " Since the Secretary did not adjust the $7,000 for COLA (due to EGTRRA 2001), I think that states using the old Internal Revenue Code are stuck at a 401(k) limit of $10,500 for 2002.

I think it is clear that no EGTRRA provisions are currently in effect for California tax purposes. For example: The California Public Employees' Retirement System 457 plan will not implement the new rollover provisions of EGTRRA for fear of jeopardizing the plan and/or creating taxable income for the Participant. See: http://www.calpers.ca.gov/benefits/defcomp...p/457taxlaw.htm

What is the 401(k) limit in California in 2002? Due to cost-of-living adjustments, it surely would've risen to $11,000. But with the EGTRRA non-conformity - and the IRS not posting a COLA adjustment - is California stuck at $10,500?

Disco Stu - what is your reference to Q&A #22?