Instructions For Forms 1099-R And 5498 - Distributions From Pensions, Annuities, Retirement Or Profit-Sharing Plans, Iras, Insurance Contracts, Etc. And Ira Contribution Information - 2016 Page 8
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24whether or not qualified, that is maintained by the United
you would any other actual distribution. Do not enter Code
States, a state or political subdivision thereof, or any
L in box 7.
agency or instrumentality thereof, made to a participant or
Permissible Withdrawals Under Section 414(w)
beneficiary is not treated as a distribution from the plan if
the loan satisfies the following requirements.
For permissible withdrawals from an eligible automatic
contribution arrangement (EACA) under section 414(w):
1. The loan is evidenced by an enforceable
The distribution (except to the extent the distribution
agreement.
consists of designated Roth contributions) is included in
2. The agreement specifies that the loan must be
the employee's gross income in the year distributed;
repaid within 5 years, except for a principal residence.
Report principal and earnings in boxes 1 and 2a
3. The loan must be repaid in substantially level
except, in the case of a distribution from a designated
installments (at least quarterly).
Roth account, report only earnings in box 2a;
4. The loan amount does not exceed the limits in
The distribution is not subject to the 10% additional tax
section 72(p)(2)(A) (maximum limit is equal to the lesser
under section 72(t), indicated by reporting Code 2 in
of 50% of the vested account balance or $50,000).
box 7; and
The distribution must be elected by the employee no
Certain exceptions, cure periods, and suspension of
later than 90 days after the first default elective
the repayment schedule may apply.
contribution under the EACA, as specified in Regulations
The loan agreement must specify the amount of the
section 1.414(w)-1(c)(2).
loan, the term of the loan, and the repayment schedule.
If the distribution is from a designated Roth account,
The agreement may include more than one document.
enter Code B as well as Code 2 in box 7.
If a loan fails to satisfy (1), (2), or (3), the balance of the
loan is a deemed distribution. The distribution may occur
Corrected Form 1099-R
at the time the loan is made or later if the loan is not repaid
If you filed a Form 1099-R with the IRS and later discover
in accordance with the repayment schedule.
that there is an error on it, you must correct it as soon as
If a loan fails to satisfy (4) at the time the loan is made,
possible. For example, if you transmit a direct rollover and
the amount that exceeds the amount permitted to be
file a Form 1099-R with the IRS reporting that none of the
loaned is a deemed distribution.
direct rollover is taxable by entering 0 (zero) in box 2a,
and you then discover that part of the direct rollover
Deemed distribution. If a loan is treated as a deemed
consists of RMDs under section 401(a)(9), you must file a
distribution, it is reportable on Form 1099-R using the
corrected Form 1099-R reporting the eligible rollover
normal taxation rules of section 72, including tax basis
distribution as the direct rollover and file a new Form
rules. The distribution also may be subject to the 10%
1099-R reporting the RMD as if it had been distributed to
early distribution tax under section 72(t). It is not eligible to
the participant. See part H in the 2016 General
be rolled over to an eligible retirement plan nor is it eligible
Instructions for Certain Information Returns, or Pub. 1220,
for the 10-year tax option. On Form 1099-R, complete the
if filing electronically.
appropriate boxes, including boxes 1 and 2a, and enter
Code L in box 7. Also, enter Code 1 or Code B, if
Filer
applicable.
The payer, trustee, or plan administrator must file Form
Interest that accrues after the deemed distribution of a
1099-R using the same name and employer identification
loan is not an additional loan, and, therefore, is not
number (EIN) used to deposit any tax withheld and to file
reportable on Form 1099-R.
Form 945, Annual Return of Withheld Federal
Loans that are treated as deemed distributions or that
Income Tax.
are actual distributions are subject to federal income tax
Beneficiaries
withholding. If such a distribution occurs after the loan is
made, you must withhold only if you distributed cash or
If you make a distribution to a beneficiary, trust, or estate,
property (other than employer securities) at the time of the
prepare Form 1099-R using the name and TIN of the
deemed or actual distribution. See section 72(p), section
beneficiary, trust, or estate, not that of the decedent. If
72(e)(4)(A), and Regulations section 1.72(p)-1.
there are multiple beneficiaries, report on each Form
1099-R only the amount paid to the beneficiary whose
Subsequent repayments. If a participant makes any
name appears on the Form 1099-R, and enter the
cash repayments on a loan that was reported on Form
percentage in box 9a, if applicable.
1099-R as a deemed distribution, the repayments
increase the participant's tax basis in the plan as if the
Disclaimers. A beneficiary may make a qualified
repayments were after-tax contributions. However, such
disclaimer of all or some of an IRA account balance if the
repayments are not treated as after-tax contributions for
disclaimed amount and income are paid to a new
purposes of section 401(m) or 415(c)(2)(B).
beneficiary or segregated in a separate account. A
qualified disclaimer may be made after the beneficiary has
For a deemed distribution that was reported on Form
previously received the RMD for the year of the
1099-R but was not repaid, the deemed distribution does
decedent's death. For more information, see Rev. Rul.
not increase the participant's basis.
2005-36, 2005-26 I.R.B. 1368, available at
If a participant's accrued benefit is reduced (offset) to
irb/2005-26_IRB/ar11.html.
repay a loan, the amount of the account balance that is
offset against the loan is an actual distribution. Report it as
-8-
Instructions for Forms 1099-R and 5498 (2016)
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