Failure to issue 1099 for P.S. 58 costs of life insurance

[Scuba 401]

so i was asked the question- what are the consequences of the failure to issue 1099-R for the P,S. 58 costs. My thinking is it is the same as the failure to issue any other 1099-R. a reporting failure which according to the ERISA outlines is $250 penalty per incident.

I saw an older thread on here that said it was optional and that if the participant didnt pay the tax on the P.S. 58 the entire death benefit would be taxable. I don't agree with that answer .  the code is pretty clear that the tax on the P.S. 58 cost must be paid.

[LANDO]

I don't agree with the prior answer either.  The PS-58 cost represents a distribution from the plan for the annual cost attributable to the pure life insurance portion of the policy.  That amount is used up each year, is an annual distribution from the plan, and I don't think it has anything to do with the basis in the policy.

I would think the correct answer is to issue 1099s for the applicable tax years and then the participant would need to file amended tax returns for the applicable years.  However, I don't like that answer!  Hopefully, someone can suggest something less painful, particularly for the participant involved.

Any thoughts on the subject would be appreciated.