Alan S. wrote:
Sounds strange. What does the other 1099R show, and is there any account # on the bottom that shows on both 1099R forms? Was there 20% mandatory withholding on any earnings accrued in the voluntary plan?
Is your former employer the federal government and is the supplemental policy "CSRS Voluntary Retirement System?"
Alan S. wrote:I can't say I understand what they are doing, but considering the sheer size of GE and long standing history of these PPA/VPA accounts, there is no chance that what they are doing is incorrect unless there is a unique screw up with your own personal account. Remember, GE's army of tax lawyers has resulted in them paying -0- federal income taxes for a period of time.I would tend to agree
While it is clear that both your PPA and VPA contributions were made after tax, the link shows the lump sum distribution as being fully taxable, a glaring inconsistency. It appears that your basis has been integrated into your "regular pension", which is actually consistent with what the link and your 1099R forms indicate.The one issue may be that the PPA half of the fund is actually not voluntary, above a certain salary 3% of your after-tax income goes into this bucket
I don't think there is any benefit to asking for help from the IRS. Does the company anywhere mention that you must use the SIMPLIFIED method that might change the taxable amount they are showing on the regular pension 1099R?NO
Tax relief for the current year appears available by doing a 60 day indirect rollover of your proceeds, but you would have to replace the 20% withholding, which is another indication that you can roll this over because mandatory 20% withholding only applies to ERDs (eligible rollover distributions). If you had an option of doing a direct rollover of this portion, it would have eliminated the withholding, but you still have 60 days to roll the balance (better with withholding replacement than without) to a TIRA account. There would be no basis in that rollover since GE appears to have transferred your basis into the regular monthly pension. This is not normal, and therefore GE should provide a clear and concise explanation, but apparently have not done that.I investigated this option, but it would have converted the whole lump sum into 100% taxable on withdrawal from the IRA later, and at least from what I understood from GE, I would have lost my cost basis and had to pay tax on the money twice. Now that I see the 1099-R's I am wondering if that explanation was wrong and I would have still gotten my contribution shown on the second 1099-R.
This is entirely different than the CSRS VCP, which allows active employees to make large contributions and convert them almost tax free. Perhaps someone viewing this is a GE Retiree who can provide a better explanation. I'm sort of guessing from the tidbits available at various sites, so just take this as preliminary speculation over what is going on here. Investigate further, but don't let that 60 days expire. If you do the TIRA rollover and later find out that this amount somehow includes basis, you can report the basis on your next 8606 to prevent double taxation.
Last question - what small portion of your total basis appears to be recovered on the other 1099R?There calculation is to recover my basis over 25.5 years, so it would seem the answer is about 4%Unfortunately the deal is done, as my retirement date was in April.What keeps me from using the Simplified Worksheet. This does not seem like something the employer would specify. In all my talks with the IRS, they were saying the Simplified Worksheet is the way to calculate this. My next step was to review the instructions.
johngaltlives wrote:Hi. Just curious if anything more happened with this. I have a similar situation, and I'm curious about whether this could be challenged based on classes (e.g., if one could show that the policy, though within IRS rules, would unfairly penalize those with less invested or at lower income/pension levels). Just a thought. It also contradicts the policies of most other companies regarding these plans, and by commingling the funds and adding the basis into the overall plan, it results in immediate double-taxation for those who withdraw their after-tax contributions early. I spoke with a representative about it months ago, and he said it was a penalty enforced by the IRS. I told him that it's not a penalty, but an unfair way to treat the basis. He then referred to Pub 575, and I told him I've read it, and if I read it as it's written, that money should be non-taxable, that nothing in there says it's as GE has it. It's done that way only so GE can keep as much of the tax benefit within the fund as possible, to the detriment of the timing of those in the fund. The whole reason I called in the first place was to tell them they had an error in my statement, and that they had switched the non-taxable portion and the taxable portion labels. Now I understand that's not the case at all. Even though another post says it's likely that this is within the regs (I'm sure it would be), I still think one could pursue an IRS letter ruling, or something similar, to establish that companies don't have the discretion to treat the basis that way. If you put the money in, after tax, and then you are drawing it out, that money can't be other money in the fund, that was put in pre-tax, but of the exact amount. That's an arbitrary switch done solely for the benefit of the plan administrator, not for the participants.