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Cleaning up Terminated & Paid-out Participants


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So I have this plan with 4 terminated employees who each have a small residual balance due to interest/dividends.  


$20.03
$8.92
$208.82

For the $208, we will send her the money.... issue a 1099-R.  For the rest, send them the money... is a 1099 needed?  I'd like to just expense it out.  What does everyone do in this case?

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If a fee lowers a participant’s distribution to $0.00, is there an information and communication value in generating and sending a Form 1099-R report to show the distribution paid as $0.00?

Or do plans’ administrators use other ways to preserve evidence that the account-closing distribution was provided?

And for the year or quarter-year in which the account becomes $0.00, does one send the participant a final account statement?

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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But does that rule preclude a payer from volunteering Form 1099-R reports no matter how small the amount?

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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I'd suspect not - so there could be multiple decisions to make -

a)  can the fees eat the balances under the plan's terms, and

b)  how much is left to pay after *that* and whether a 1099 would be specifically required based on the actual payment value.  (And I think the $10 is an aggregate total, not any one individual payment to the person, right?)

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The Instructions state: “File Form 1099-R . . . for each person to whom you have made a designated distribution[,] or are treated as having made a distribution[,] of $10 or more[.]”

Bri, it seems right that the $10 refers to the sum of all payments and deliveries made to the distributee during the reported-on year.

Let’s consider a situation Basically describes, but applying ratherbereading’s mention of a fee resulting in a distribution of $0.00. A participant’s account is $20.03. The plan’s fiduciary had approved the service provider’s $25 distribution-processing fee. On receiving the plan administrator’s instruction to process a distribution, the service provider collects $20.03, leaving $0.00 available to pay the distributee.

Is a 1099-R showing a gross distribution of $0.00 permitted?

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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1099-Rs show zero quite often simply as a result of being a corrected form, so I suspect nothing's preventing them from being generated almost "voluntarily"...

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