1099 R coding

[Guest ehayes]

i have a 401k plan with a 9/30/01 year end that failed the adp

test. excess contributions will be distributed in april 2002. how

should box 7 of form 1099r be coded? what is tax implication to

participants.

[Fredman]

Because you are beyond the 2.5 month after plan year end deadline...

Participants should get a 2002 1099-R with an '8' in box 7. This means taxable in the current year or 2002. Distribution is not eligible for rollover and not subject to 10% early withdrawal penalty.

As a side the note, the client will also need to pay a 10% excise tax on the refunds and file form 5330.