Plan administrator or participant responsibility
Does anyone know who is responsible to correctly calculate a pro-rata distribution from a retirement plan; is it the plan administrator or the participant. I assume it is the plan administrator since they are the ones ultimately issuing the 1099r, is that correct? Regarding a pro-rata distribution from a TIRA, it appears the calculation is solely the responsibility of the individual and not the custodian.
Permalink Submitted by Jose Morales on Thu, 2015-05-28 16:18
For an employer sponsored plan such as a 401K, it is the plan administrator’s responsibility to keep track of any post tax contributions made to the plan. For an IRA, the responsibility for keeping track of nondeductible contributions belongs to the individual.
Permalink Submitted by Peter Thomann on Fri, 2015-05-29 17:48
I was asking who is responsible to correctly perform the pro-rata calculation upon a distribution?
Permalink Submitted by Alan - IRA critic on Fri, 2015-05-29 18:47
The plan administrator is responsible because for non IRA plans, they must calculate the taxable amount and the basis amount which are separately shown on the 1099R.
Permalink Submitted by Alan - IRA critic on Fri, 2015-05-29 18:47
The plan administrator is responsible because for non IRA plans, they must calculate the taxable amount and the basis amount which are separately shown on the 1099R.
Permalink Submitted by Peter Thomann on Sat, 2015-05-30 00:30
Thank you Alan.
Permalink Submitted by Nathan Kastner on Mon, 2015-06-08 18:50
Wait a tick… I’m not so sure I agree, but I think it may simpy be a function of bad terminology. In any given employer plan (such as a 401k), there are a lot of different people involved. There’s the participant (duh). But there’s also a plan trustee, which is usually an executive at the company that is ultimately reponsible for the plan. There’s also a custodian that is merely tasked with holding the plan assets for the participants. And there’s frequently an investment advisor that helps choose which investments will be offered inside of the plan. And then there’s a third-party administration (called a TPA) that is the equivalent of a plan accountant. And, lastly, there’s a plan administrator, that is often an HR employee of the company that serves as the customer service rep. If an employee wants to change their contribution amount, or their beneficiary, or apply for a hardship distribution, etc…. this is the person the employee will typically contact. Given the above, the plan administrator is NOT responsible for calculating the pro-rata amounts. That would be the TPA’s job. This may very well be whom the OP was referring to, but I just want it to be clear. Regardless, it isn’t the employee’s responsibility.
Permalink Submitted by Jose Morales on Tue, 2015-06-09 16:53
There is no custodian for a 401K, that term is only used when referencing IRAs. It is the plan administrator’s responsibility, the TPA is not an official piece of the 401K puzzle (although one can be employed by the plan administrator, which does not relieve the administrator of their duties). Here are definitions from the IRS: http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Definitions