1099 for Excess Contribution

[Rob P]

Can someone please help and confirm the required 1099-R code for Excess Contributions?

I have a plan that failed the 2009 ADP test and is making refunds today (i.e., prior to March 15th ), should we be reporting it as a Code P or Code 8. I am assuming Code 8, since it is now taxable in 2010 (our software is still insisting its Code P).

Also, is there any reporting difference if the refund takes place after March 15th?

Any comments are appreciated.

[Bill Presson]

Can someone please help and confirm the required 1099-R code for Excess Contributions?

I have a plan that failed the 2009 ADP test and is making refunds today (i.e., prior to March 15th ), should we be reporting it as a Code P or Code 8. I am assuming Code 8, since it is now taxable in 2010 (our software is still insisting its Code P).

Also, is there any reporting difference if the refund takes place after March 15th?

Any comments are appreciated.

It will be code 8. The only difference if it is paid after March 15th is that the employer will owe a 10% penalty with a form 5330.

[Rob P]

Thanks for the confirmation. Appreciate the time.

[K2retire]

And it goes on a 2010 form to be issued next January, not now.

[imchipbrown]

I have a failed test, but the Plan has terminated and all assets distributed. The affected HCE rolled her ~$200K to an IRA in early 2010. The excess (after Catch-ups) is ~$700. So, I can see two 1099-Rs; one for net rollover ($200k-$700)? and one for $700 excess. What concerns me is no actual refund, so possible ER tax? I think $700 would also be a deductible IRA contribution in 2010.

[Tom Poje]

see 1.401(k)-2(b)(2)(v) in regards to terminating plans

last sentence

...if entrie balnce is distributed prior to distribution of excess contribution...the distribution is deemed to have been a corrective distribution...

[austin3515]

But not eligible for rollover treatment thiugh right? So this isn' t saying the ADP Test is a moot point in the year of termination? We would still notifyt the receiving IRA custodian that the amount was not eligible for rollover?

[imchipbrown]

So, Tom's post says to me the the ER is off the hook for 10% penalty. So now, I tell the distributing fund, issue a 1099-R for ($200k-$700) as a rollover and $700 as an excess. Participant would report $700 income in 2010 and $700 IRA contribution deduction (assuming no unrelated complications). So ADP isn't really moot, since Participant is reporting income?

Receiving IRA could kick out the $700 and accept it right back. If the number were much bigger (>$5,500), I can see that that would be a problem.

[Tom Poje]

I'm not really sure how to interpret the wording of the reg cite.

since the last words of the final sentence say ".....to the extent that a corrective distribution would otherwise have been required.

that word 'otherwise' almost seems to me to say don't worry about it, but I've been wrong on plenty of stuff before.

plus it also said the corrective distributuion was 'deemed' to have been made. same thing again, 'deemed' to me means treat things as if they had been done when in reality they weren't.

(and this only appears to apply in situations in which all assets were paid within 12 months of termination)