Trust income received after plan termination

[imchipbrown]

I had a 401(k) that I terminated on 4/15/2020.  I was the only participant.  I rolled everything to my IRA.  I filed the final 5500-SF return.  I shut down my business on 9/15/2021 and retired!  Yay!

I'm sitting here minding my own business and an envelope arrives from Schwab.  It's a statement with a Statement Period July 1, 2020 - March 31, 2025 showing that an old investment paid out a settlement of $95.  I had to call to get a check issued because I haven't had online access to that account since 2020.

OK, now I have the check.  I'm going to deposit it.  I just don't know where (IRA, personal account?) and how much paperwork has to be generated.  If it's too big of a hassle, I was thinking I'd just rip up the check, but the account would be open (maybe) forevermore.

What to do, what to do

[david rigby]

IRA.  If you put it in personal account, the net effect will be to (magically) change it from pre-tax dollars to already-taxed dollars.

[Belgarath]

What's the difference between true love and retirement plan paperwork? Retirement plan paperwork is forever...

 

[imchipbrown]

Neither the Plan nor Trust exist, just the $95, so I think it has to be income first.  Why the short round-trip (a couple years) to an IRA?   Just lunch money, really.

 

[ratherbereading]

Lunch money? A lot of people would love that $95! 

[Paul I]

You may want to call Schwab and ask them on what tax form are they going to report the payment and who will be the payer, or just wait until next January to see what they send to you.  You could then treat it on your tax return in a manner consistent with the Schwab information.

In the meantime, have a wonderful lunch (or champagne brunch)!

[Bill Presson]

My goodness (language bleached for family site), I hate those trailing dividends and incredibly late legal settlements. 

[imchipbrown]

I just got the check.  It's made "To The Order Of:   XXX LLC 401(k) Plan"!  I'll have to call Schwab to see WTH I'm supposed to do with that.  XXX LLC shut down 2020.  All bank, brokerage accounts closed as well.  I mean, I thoroughly killed and cremated everything.  Nothing remains but the obituary.

 

[Belgarath]

 

11 hours ago, imchipbrown said:

Nothing remains but the obituary.

And all the wonderful memories...

[ESOP Guy]

Audit lottery.  

Put the check in the personal account.  If you get a 1099-R you treat it the way that reflects.  If you don't get a 1099-R don't report anything.  If the IRS comes along and hits you up how much can the tax and penalty be?  

This is the perfect case for playing the audit lottery. 

[imchipbrown]

I talked to Schwab and was told I could deposit the check online to my IRA or personal brokerage account.  I did and it took.  I put it in my IRA, so no lunch for a few more years.

 

[John Feldt ERPA CPC QPA]

Another we possibility might be to disclaim the check. We’ve already spent $95 worth of time discussing it!

[RatherBeGolfing]

12 hours ago, John Feldt ERPA CPC QPA said:

We’ve already spent $95 worth of time discussing it!

The real question is, who do we bill it to??

[Belgarath]

Elon Musk.

[Peter Gulia]

This situation was relatively easy because one human held powers to act for the discontinued retirement plan’s administrator, the plan’s trustee, the plan’s one participant, and the IRA holder.

Let’s recognize difficulties a discontinued retirement plan might face if it has no currently serving fiduciary and lacks a quick way to get an appointment of someone willing to serve. Imagine the plan’s share of the settlement is $95,000, to be allocated among 1,000 participants and beneficiaries. Or, $1 million, among 10,000 people.