Pension Distribution Issued after Death

[Guest mabrick]

Reporting question for a reclaimed pension distribution. For example, if distributions were made the final three months of 2011, only to find out in 2012 that the pensioner was deceased in September of 2011, thus not entitled to the last three distributions in 2011.

In turn the 2011 distribution was reclaimed on February 3, 2012.

Must I revise the 2011 945 and issue a corrected 1099R?

[ETA Consulting LLC]

A corrected 1099-R would seem to be the best approach.

Good Luck!

[Guest mabrick]

A corrected 1099-R would seem to be the best approach.

Good Luck!

In which case, a revised 945 would need to be filed as well??

[mbozek]

Reporting question for a reclaimed pension distribution. For example, if distributions were made the final three months of 2011, only to find out in 2012 that the pensioner was deceased in September of 2011, thus not entitled to the last three distributions in 2011.

In turn the 2011 distribution was reclaimed on February 3, 2012.

Must I revise the 2011 945 and issue a corrected 1099R?

No. At the time the payments were made they were required distributions to participant which were included as taxable income. The repayment does not change the taxable event that ocurred in 2011 because it ocurred in a different tax year. Deceased's estate should be able to claim the payment as either a credit or deduction on its tax return for 2012. Pub 525 P36 discusses repayment for an individual taxpayer. Estate needs to consult tax advisor.

Q- who repaid the excess distributions- was it the decedent's estate?

[Guest mabrick]

Reporting question for a reclaimed pension distribution. For example, if distributions were made the final three months of 2011, only to find out in 2012 that the pensioner was deceased in September of 2011, thus not entitled to the last three distributions in 2011.

In turn the 2011 distribution was reclaimed on February 3, 2012.

Must I revise the 2011 945 and issue a corrected 1099R?

No. At the time the payments were made they were required distributions to participant which were included as taxable income. The repayment does not change the taxable event that ocurred in 2011 because it ocurred in a different tax year. Deceased's estate should be able to claim the payment as either a credit or deduction on its tax return for 2012. Pub 525 P36 discusses repayment for an individual taxpayer. Estate needs to consult tax advisor.

Q- who repaid the excess distributions- was it the decedent's estate?

Sometimes it is a family member that will refund and sometimes we are able to do a reclaim, debiting the account we credited in the first place. Majority of cases this is done, it falls within the same calendar year, so it is not an issue.

So if what you say above is true, then I wouldn't issue a corrected 1099R, right? If I did, then the 945 wouldn't tie out to the 1099R's.

[mbozek]

Reporting question for a reclaimed pension distribution. For example, if distributions were made the final three months of 2011, only to find out in 2012 that the pensioner was deceased in September of 2011, thus not entitled to the last three distributions in 2011.

In turn the 2011 distribution was reclaimed on February 3, 2012.

Must I revise the 2011 945 and issue a corrected 1099R?

No. At the time the payments were made they were required distributions to participant which were included as taxable income. The repayment does not change the taxable event that ocurred in 2011 because it ocurred in a different tax year. Deceased's estate should be able to claim the payment as either a credit or deduction on its tax return for 2012. Pub 525 P36 discusses repayment for an individual taxpayer. Estate needs to consult tax advisor.

Q- who repaid the excess distributions- was it the decedent's estate?

Sometimes it is a family member that will refund and sometimes we are able to do a reclaim, debiting the account we credited in the first place. Majority of cases this is done, it falls within the same calendar year, so it is not an issue.

So if what you say above is true, then I wouldn't issue a corrected 1099R, right? If I did, then the 945 wouldn't tie out to the 1099R's.

From the plans perspective that is correct. However, I dont know what happens if a taxpayer other than the taxpayer who cashes the payment makes the refund b/c the right to reduce taxable income in a later year accrues to the person who received the overpayment. If the decedent's estate cashed the checks after the employee died then the estate should have the right to claim the credit or deduction on its 2012 return if it repaid the funds to the plan. This is why the estate needs a tax advisor. I have never seen a situation that you describe. In all of the cases I am aware of the same taxapayer who received the overpayment returned the funds to the plan.

[Guest mabrick]

Reporting question for a reclaimed pension distribution. For example, if distributions were made the final three months of 2011, only to find out in 2012 that the pensioner was deceased in September of 2011, thus not entitled to the last three distributions in 2011.

In turn the 2011 distribution was reclaimed on February 3, 2012.

Must I revise the 2011 945 and issue a corrected 1099R?

No. At the time the payments were made they were required distributions to participant which were included as taxable income. The repayment does not change the taxable event that ocurred in 2011 because it ocurred in a different tax year. Deceased's estate should be able to claim the payment as either a credit or deduction on its tax return for 2012. Pub 525 P36 discusses repayment for an individual taxpayer. Estate needs to consult tax advisor.

Q- who repaid the excess distributions- was it the decedent's estate?

Sometimes it is a family member that will refund and sometimes we are able to do a reclaim, debiting the account we credited in the first place. Majority of cases this is done, it falls within the same calendar year, so it is not an issue.

So if what you say above is true, then I wouldn't issue a corrected 1099R, right? If I did, then the 945 wouldn't tie out to the 1099R's.

From the plans perspective that is correct. However, I dont know what happens if a taxpayer other than the taxpayer who cashes the payment makes the refund b/c the right to reduce taxable income in a later year accrues to the person who received the overpayment. If the decedent's estate cashed the checks after the employee died then the estate should have the right to claim the credit or deduction on its 2012 return if it repaid the funds to the plan. This is why the estate needs a tax advisor. I have never seen a situation that you describe. In all of the cases I am aware of the same taxapayer who received the overpayment returned the funds to the plan.

Thank you!