IRS Adds to Missing Plan Participant Guidance

The IRS has released guidance regarding qualified plan distributions to state unclaimed property funds. Revenue Ruling 2020-24 covers the withholding and reporting requirements when a plan distribution is made to a state unclaimed property fund. Revenue Procedure 2020-46 modifies and updates prior guidance to make it easier for individuals who obtain benefits from a state unclaimed property fund to roll over their benefits.

Revenue Ruling 2020-24 

The ruling adds a withholding and reporting requirement for retirement fund distributions from state unclaimed property funds. Under Section 3405, individual benefits payments from a qualified retirement plan are subject to federal income tax withholding. Such payments are also subject to reporting under Section 6047 by plan administrators. 

To satisfy the reporting requirement, plan administrators must file a Form 1099-R for each individual receiving a distribution in excess of $10 or more. The total amount of the distribution must be reported in Box 1 of Form 1099-R and the withheld federal income tax must be reported in Box 4.

The IRS has provided transitional relief for these reporting requirements, stating that an individual will not be treated as failing to comply with these reporting requirements for payments made before January 1, 2022, or the date that it is reasonably practical to comply, whichever is earlier.

Revenue Procedure 2020-46 

Rev. Proc. 2020-46 updates the list of permitted reasons in Rev. Proc. 2016-47 for self-certification of eligibility to waive the 60-day rollover requirement of distributions to eligible retirement plans by adding a new reason: a distribution made to a state unclaimed property fund. As under Rev. Proc. 2016-47, a self-certification relates only to the reasons for missing the 60-day deadline, not to whether a distribution is otherwise eligible to be rolled over.

Taxpayers may make the certification by using the model language in the Rev. Proc. 2020-46 appendix on a word-for-word basis or by using language that is substantially similar in all material respects,

For purposes of accepting and reporting a rollover contribution into a plan or IRA, a plan administrator or IRA trustee may rely on a taxpayer’s self-certification in determining whether the taxpayer has satisfied the conditions for a waiver of the 60-day rollover requirement. However, a plan administrator or an IRA trustee may not rely on the self-certification for other purposes or if the plan administrator or IRA trustee has actual knowledge that is contrary to the self-certification.

Rev. Proc. 2020-46 is effective as of October 16, 2020.

Having the Hall Benefits Law team of employment attorneys on your side means having someone you can depend on for clarification of newly enacted rules and regulations. Call our team today at 678-439-6236.

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