§#$%! Posted January 5, 2006 Posted January 5, 2006 A small plan purchased an annuity for a participant. How should this transaction be disclosed on the 5500? Distribution on item 2e of Schedule I in the amount of the annuity purchase? Should a 1099-R be prepared for the participant? Thank you.
SoCalActuary Posted January 5, 2006 Posted January 5, 2006 Yes, no, you're welcome! Seriously, the annuity purchase relieved the plan permanently of the obligation. The insurance company will be the payor, so they issue the 1099R. Also, no SSA form is required, unless the annuity contract is not permanent. If it can be reversed, or if a lien might be needed because the plan is underfunded, then my position changes.
mwyatt Posted January 5, 2006 Posted January 5, 2006 WRT to the SSA issue, in ongoing plans I've only seen (in my admittedly small plan focused world) annuity purchases for immediate annuities, therefore no need for SSA reporting.
david rigby Posted January 6, 2006 Posted January 6, 2006 Expanding on those answers, the annuity purchase is relevant to the Schedule SSA if the participant had been reported on a previous SSA (for example, as a VT participant). I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.
Guest DBtech Posted January 6, 2006 Posted January 6, 2006 Also, I believe if the insurance company has relieved the plan sponsor of any obligation to provide the benefit, the annuitant is not considered a plan participant for 5500 or PBGC premium purposes.
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