Distributions from 457 plans

[Guest MMorgan]

We recently took over a 457 plan that appears to be ineligible. While reviewing the records, I noticed that as distributions were made over the last few years the client has been reporting the distribution via the employees W2 versus a 1099R. They has requested we continue this practice. We are now looking at terminating the entire plan and distributing the assets because it appears the plan is ineligible (rank and file employees are the only ones in this nonprofit plan). Are we asking for problems as a 3rd party TPA not requiring 1099Rs be issued?

Any assistance would be appreciated.

Thanks