Is a 5329 Filing Necessary?

[Guest temmert326]

An active employee started MRD payments on time. 7 years later, he became disabled and terminated under our plan. At that point, he should have been sent his retirement package and switched from MRD to retirement. Notice the "should". It was caught after 6 years, and he was finally sent a retirement package. Based on the option he selected, his pension would have been less than the MRD payments he received, so he owed $3,000 back to the trust. To avoid having to make the repayment, he selected a life annuity option with a payment $40 higher than the MRD. Now we owe him $3,000.

The question is this... does he have to file IRS Form 5329 to report this $3,000 retroactive payment as excess accumulations of his pension benefit? I realize we're not talking about a lot of money here, but where there is one problem person, there are bound to be more!

[Effen]

I guess I don't see where there was a violation of the MRD. The MRD is the MRD and is independent of his "retirement" election. If he was taking out enough to satisfy the MRD, where is the failure?

Seems like this is more of a plan problem than an MRD problem. The plan failed to provide him with a timely election and therefore has a problem. If he really wants the J&S and is "persuaded" to take a life annuity you could be looking at a bigger problem down the road if he dies and his spouse argues that she only gave her consent because of a plan problem.

You could let him elect the J&S, the ask for the money back, but not work too hard to collect it. You could also reduce his future payments by some amount until the amount has been recovered. Not a good solution because he didn't really do anything to cause the problem.

This isn't probably the "right" answer, but I may say "no harm, no foul", let him take the J&S prospectively and leave past sins in the past.

[Guest temmert326]

That was pretty much where I was coming from and the recommendation I was going to make. I don't see why the IRS would care about this one.

BTW - He took the life annuity instead of a PCL that would only have another year left based on his retoractive retirement date, so it really did benefit him. I'm not sure I like that it was done after his initial election - should have been a call made to him prior to his election.

Thanks!

[TPApril]

The topic fits my question, though my question is not related to the prior one.

VCP was submitted and accepted on behalf of missed rmds. Do affected retirees still need to file a 5329? If so do they file with a copy of the accepted VCP letter, or not file at all?