1099 question

[Pension RC]

Does anyone know if a 1099 is required for the transfer of surplus assets from a terminating DB plan to a qualifying replacement plan?

Any help would be appreciated!

[My 2 cents]

Just a guess - if the transfer is directly from one qualified plan to another, wouldn't there be no taxable (or reportable) transaction?

[Rball4]

Anytime a participant is distributed money from the plan (excluding a loan), a 1099 needs to be issued.

[My 2 cents]

Rball4 - thanks, I stand corrected.

The 1099-R would have to show that the entire amount so transferred was not taxable. Code G I think. So the participant would show the gross distribution on the 1040 (including any reallocation rolled over to the replacement plan) and then exclude the non-taxable portion.

If some or all of the distribution for the pre-termination accrued benefit were paid directly to the participant and the new allocation was transferred directly to the other plan, there would have to be two 1099-Rs (one with code G, showing that the proceeds were not currently includable in taxable income and one with a suitable code since the proceeds could be taxable).

There would be no distinction between such a reallocation of surplus assets rolled over to another plan and a normal distribution properly rolled over directly to an IRA, would there?

[Belgarath]

I'm confused. How is a transfer of surplus assets (and assets in a DB plan are not "allocated" to individual participants) directly to a replacement plan considered as being reportable to a participant or participants on a 1099? I don't see this as being reportable on a 1099 at all. Nothing is being distributed or is distributable to participants.

[david rigby]

If this is transfer of surplus, it's not "assigned" to any individual, so there is no "plan distribution".

Note that both Schedule I and Schedule H of 5500 have a question about plan-to-plan transfers.

[masteff]

1099-R instructions page 6 - Generally, do not report a transfer between trustees or issuers that involves no payment or distribution of funds to the participant.

As per Code Section 4980 which provides the qualified replacement plan rules, the transfer is between plans. Any allocation to participants in the replacement plan occurs after the transfer.

The only other type of 1099 that might seem to apply is a 1099-MISC and as I opined in the OP's other post of this question http://benefitslink.com/boards/index.php?/topic/54891-1099-question/ , 1099-MISC is not applicable either.