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New Changes
in 2011 for Form 1099-R Reporting
The Internal Revenue Service (IRS) has issued the instructions for Forms 1099-R and 5498 for
2011, containing substantial changes over the 2010
instructions. Several notable changes that may be of interest to
governmental plans are discussed below:
- Pilot Program
for Truncated Social Security Numbers has Ended. Filers of Forms
1099-R must show the recipient's complete
identifying number on all copies of the forms.
- Rollovers to
Designated Roth Accounts Within the Same Plan (In-Plan Roth
Rollovers). As you know, an employer offering an Internal
Revenue Code (Code) Section 401(k), 403(b), or governmental 457(b)
plan may allow participants to contribute all or a portion of the
elective deferrals they are otherwise eligible to make to a
separate designated Roth account established under the plan.
The Small Business Jobs Act of 2010 permitted participants of such
plans to rollover their pre-tax account
balances to a designated Roth account in a direct rollover within
the same plan (i.e., in-plan Roth rollover). The new
instructions provide reporting guidance for these in-plan
rollovers. In-plan Roth rollovers are not subject to
the 10 percent additional tax on early distributions
under Code Section 72(t) nor to 20 percent mandatory withholding
under Code Section 3405. The amounts originally contributed
on a pre-tax basis would be included in gross income at the time
of the rollover. The in-plan Roth rollover amount is reported
in box one, the taxable amount in box 2a, and any basis recovery
amount in box five. Code G is to be entered in box seven.
- Distributions
Allocable to In-Plan Rollovers From Designated Roth
Accounts. If any portion of an in-plan Roth rollover that
was treated as gross income is distributed within the five-year
period beginning with the first day of the participant's tax year
in which the rollover was made and ending on the last day of the
fifth year of that period, then the distribution will be includible
in gross income and will be subject to the 10 percent tax
penalty, unless an exception applies. The distribution is
reported in a new box 10, the first year of the
five-taxable-year period for determining qualified distributions
is reported in box 11, and the applicable codes are reported in
box seven.
- Coding
Distributions From Designated Roth Accounts. Code B has been
reworded for reporting all distributions from designated Roth
accounts.
- Renumbered
Boxes.
The addition of a new box 10 has required box renumbering.
Please take note of the changes made to former boxes 10 through
15, which have been renumbered as boxes 12 through 17,
respectively.
Please refer
to IRS
Notice 2010-84 for more guidance on in-plan Roth rollovers.
If you have any questions or would like additional information
about Form 1099-R reporting or in-plan Roth rollovers, please contact Terry
Mumford, Mary
Beth Braitman, Lisa
Harrison, or your Ice Miller employee benefits
attorney.
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