Qualified Plan Distributed Annuity (QPDA)

[Guest Tom:]

Should a plan report a qualified plan distributed annuity (QPDA) as a non-taxable distribution in Box 8 of 1099-R, leaving box 1 and 2a blank?

In the following articles, Bob Toth indicates that 1099-R reporting is required because the distribution of a QPDA is a in-kind lump-sum distribution:

http://www.businessofbenefits.com/uploads/...m%20401k(1).pdf

http://www.bakerdstreamingvid.com/blogdocs...t_Annuities.pdf

But, isn't the distribution of a QPDA exempt from reporting since it is reasonable to believe the QPDA distribution is not includable in gross income under IRC § 6047(d)(1) and IRC § 3405(e)(1)(B)(ii)?

[Bird]

I am wrestling with this too. The 1099-R instructions say that "Amounts paid under an annuity contract purchased for and distributed to a participant under a qualified plan can qualify as eligible rollover distributions."

But the regs (1.402©-2, Q/A -10) go on to talk about how the contract could be surrendered, and (I don't know about you but) I'm talking about a single premium immediate annuity with monthly payments, and such a contract can't be surrendered. Maybe I'm overthinking and should just report it as a rollover and be done with it; the bottom line is that it's not taxable and probably doesn't matter.

[Tom Poje]

only because I called the IRS help line yesterday and was redirected to another dept phone line to be helped with the 1099R form, you might try them

the help line phone number for this dept was 866-455-7438

(I had called first thing in the morning (8:30), no waiting, etc.)

[Guest Tom:]

Bird:

I think that the rollover language you are looking at refers to payments from the QPDA after it is distributed to the participant. Clearly such payments may be rolled if they would be eligible for rollover if made from the plan itself, such as with payments attributable to the surrender of an annuity contract within the plan. In your case, immediate annuity payments are probably not eligible for rollover, regardless of whether made by the plan or by a QPDA.

However, I do not think that the distribution of a QPDA qualifies as a rollover because the annuity distributed to the participant is not an eligible retirement plan under IRC §402©(8)(b). Therefore, I do not think it is appropriate to report the distribution of a QPSA as a rollover.

I am close to reaching the same conclusion as you that since the distribution is not taxable, it probably doesn't matter whether the distribution is reported. Despite Bob Toth's direction, I will probably rely on IRC § 6047(d)(1) and IRC § 3405(e)(1)(B)(ii) and conclude that the distribution of a QPDA is exempt from 1099-R reporting since it is reasonable to believe the distribution is not includable in gross income.

[Bird]

I think that the rollover language you are looking at refers to payments from the QPDA after it is distributed to the participant. Clearly such payments may be rolled if they would be eligible for rollover if made from the plan itself, such as with payments attributable to the surrender of an annuity contract within the plan. In your case, immediate annuity payments are probably not eligible for rollover, regardless of whether made by the plan or by a QPDA.

However, I do not think that the distribution of a QPDA qualifies as a rollover because the annuity distributed to the participant is not an eligible retirement plan under IRC §402©(8)(b). Therefore, I do not think it is appropriate to report the distribution of a QPSA as a rollover.

I am close to reaching the same conclusion as you that since the distribution is not taxable, it probably doesn't matter whether the distribution is reported. Despite Bob Toth's direction, I will probably rely on IRC § 6047(d)(1) and IRC § 3405(e)(1)(B)(ii) and conclude that the distribution of a QPDA is exempt from 1099-R reporting since it is reasonable to believe the distribution is not includable in gross income.

I did reach the same conclusion (not to report) when we handled the transaction during the year and researched it. I think I'll stick with that decision.

[Guest Tom:]

Tom Poje - Thank you for recommending that I call the IRS. I described the issue to the IRS yesterday and today the IRS advised that it is not necessary to issue a 1099-R upon the non-taxable distribution of a QPDA.

[Tom Poje]

A bigger thanks to you for following up and posting the IRS response.

sounds like your experience was as good as mine.