Roth Corrective Distribution & Form 1099-R

[Gruegen]

For a distribution of excess contributions (failed ADP test) attributable to Roth 401(k) contributions within 2 1/2 months after the end of the plan year, how should the Form 1099-R be completed?

Assumptions

For the 2006 Plan Year, the plan's only HCE made $15,000 of Roth 401(k) Contributions. After performing the ADP test, it is determined that a $1,000 excess contribution needs to be returned. Further, there is $75 of earnings (including gap period earnings) returned. A check for $1,075 is cut on March 1, 2007.

Option #1 - 1 Form 1099-R

Box 1 - $1,075

Box 2a - $75

Box 5 - $1,000

Box 7 - P (note that the 1099-R instructions do NOT permit use of Code P and Code B)

Option #2 - 2 Form 1099-R's

The return of Roth 401(k) contributions would be reported as:

Box 1 - $1,000

Box 2a - $0

Box 5 - $1,000

Box 7 - B

The return of earnings would be reported as:

Box 1 - $75

Box 2 - $75

Box 5 - $0

Box 7 - P

Or is there another option that I am missing? Thanks for any help.

[WDIK]

For 2006 forms, doesn't code P indicate that the distribution is taxable in 2005, which would not be the case?

It appears to me that you would use the code 8B.

[Disco Stu]

For 2006 forms, doesn't code P indicate that the distribution is taxable in 2005, which would not be the case?

Yes, but the example says that the distribution took place 3/1/2007. A 2007 1099R is required.

I'd vote for option #1, but that's just my speculation.

[WDIK]

First, I must admit to confusing the applicable years.

My thoughts upon additional reflection are that the 2007 instructions, when they are issued, may very well allow codes B and P to be used together. It seems to me that the reason that is not the case on the 2006 forms is that Roth 401(k) deferrals were not allowed until 2006.