1099R & Form 5500 Schedule R

[Guest shafter]

While completing Schedule R of a Form 5500, we have discovered the brokerage firm is putting the distribution into an IRA and then paying lump sums from there. They are then generating a 1099R for the IRA. The client has not been preparing 1099R from the trust. Quite possibly, if the money stays in the IRA, no 1099R is generated. (This is the second instance we have uncovered this week with at least 2 brokerage firms.) We think there are 2 issues here 1)the EIN on Schedule R should be the brokerage house, which they are reluctant to provide; 2)nonexistant 1099Rs for the IRAs that do not leave the brokerage house. Anyone else with similar experience? What are consequences to plan? Please site regs. Thanks

[Kristina]

When you say the brokerage firm is putting the distribution into an ira and then making the lump sum distributions from there, do you mean that the participant elected a lump sum distribution from the plan and the broker decided to open an ira for them and then make the distribution.

The plan is making the distributions when the money leaves the plan. Unless the IRA is owned by the trustee of the plan, the money left the plan as soon as it was deposited into the IRA. If the IRA is not owned by the trustee of the plan, the plan is responsible for providing 1099s for the distribution out of the plan.

You would only report the brokerage firm EIN on the Sch R, if they prepared 1099s in the plan's behalf. Filing 1099s as the IRA custodian does not count. Only if there is an agreement with the brokerage firm that they provide the 1099s on the plans behalf as the payer would the plan not have to file 1099s under the trust TIN. If there is no such agreement, then the plan is still responsible.

[RCK]

I either don't understand the question or am afraid I do understand it. What is the brokerage firm's official capacity? Is the brokerage firm a fiduciary?

Can you walk through the events that take place when the participant terminates employment?