NEWSLETTERS

As year end approaches, plan administrators of retirement plans should note that they are required to file Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit Sharing Plans, IRA’s Insurance Contracts, etc. for all distributions of $10 or more from their retirement plans.

Participants or beneficiaries who received qualified retirement plan payments, must receive Form 1099-R no later than January 31 of the year after the payment.

Form 1099-R is an information return, which should include the following:

• Plan’s name and address,
• EIN (Employee Identification Number),
• Recipient’s name and address,
• Social security number,
• Gross distribution and the taxable amount,
• Federal income tax withheld,
• The distribution code (the distribution code indicates the type of distribution and the tax effect, if any apply.)

Form 1099-R along with Form 1096 are to be filed with the Internal Revenue Service at one of five national service centers depending upon where the principal business office is located, no later than February 28 of the year after the payment.

When a participant receives a lump sum distribution greater than $200, federal withholding of 20% is required to be deposited monthly or semiweekly. Plan administrators can deposit the withholding electronically or by using an 8109-B coupon with a federal depository (i.e. your local bank). Form 945, Annual Return of Withheld Federal Income Tax, is used to report income tax withheld from non-payroll payments such as retirement plan distribution withholding.

If you fail to file a correct information return by the due date and you are unable to show reasonable cause, you may be subject to a penalty. The penalty amount is based on when you file the correct information return.

$15 per information return if you correctly file within 30 days, maximum penalty $75,000 per year.

$30 per information return if you correctly file more than 30 days after due date but before 121 days, maximum penalty $150,000 per year.

$50 per information return if you file after more than 120 days or you do not file required information returns, maximum penalty $250,000 per year.

The penalty for intentional disregard of filing requirements is a minimum penalty of $100 per information return with no maximum penalty. Exceptions to the penalty do apply.

We strongly recommend, that all plan administrators check with their third party administrator or investment company to determine who is filing these necessary distribution forms. Certain investment and insurance companies have a custodial relationship with the retirement plans who invest with them and prepare all of the necessary distribution forms.

If you have any questions regarding Reporting Qualified Retirement Plan Distributions, please contact Administrative Retirement Services, Inc.

© Administrative Retirement Services, Inc.  2001
Published by Administrative Retirement Services, Inc., Copyright 2001 by Administrative Retirement Services, Inc. Reproduction in whole or in part is prohibited except by written permission. All rights are reserved.  Information has been obtained by Administrative Retirement Services, Inc. from sources believed to be reliable. However, because of the possibility of human or mechanical error by our sources, Administrative Retirement Services, Inc. or others, Administrative Retirement Services, Inc. does not guarantee the accuracy, adequacy, or completeness of any information and is not responsible for any errors or omissions or the result obtained from the use of such information.  Readers should seek specific advice before acting with regard to the subjects mentioned here.

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