Alight and State Street 1099-Rs

[dwhisenant]

Today I received the Alight 1099-R to go along with the State Street 1099-R as well as the Alight W-2. When I entered those into Turbo Tax, it shows you last year and this year earnings, the total 1099-R amount was 1 months payment higher than last years payment. So how many months should Avaya/Alight reported and how many PBGC/State Street months should have been reported. I assume I will have to go back to either Avaya/Alignt or PBGC to get a corrected 1099-R but if anyone has ideas let me hear them.

Be aware, yours may also be wrong.

Also, only got the 1 W-2 which includes the lump sum payment and life insurance costs. Also, only the insurance is considered earned income so moving any of the lump sum to an IRA will not be considered a tax offset - at least that is my understanding. I will only be allowed to offset the insurance with and IRA donation for 2018.

[dwhisenant]

Follow up, Alight's 1099-R is for 6 months, State Street's is for 7 months.

[mpen430]

The answer is that Avaya (and most companies) pay pensions in arrears at the end of the month. The PPGC pays them in advance at the beginning of the month. I'm pretty sure if you look back, you will find that we received two checks during the transition month.

[dwhisenant]

I think I recall this discussion last year, thanks for reminding me. So everyone got paid for 13 months in 2018 and 2018 only. 2019 and forward it will be 12 months, right?

[mpen430]

That's my understanding. I suppose it means that our survivor benefits will kick in one month earlier when the time comes, but hopefully, that's in the distant future! LOL

[dwhisenant]

Here is another impact of the lump sum payment. In my case the lump sum caused me to have to pay taxes on my Social Security income, which then caused my adjusted gross income/AGI to be above the limit allowed to contribute to my wife's IRA. Wish we could average income, but we can't.

[ahretirement]

If the W2 you received from Alight has the amount of your ASPP settlement in Box 11, there is NO impact on your early retirement social security. The one I received is correct. If yours is not you will need a corrected W2 from Alight.

[Wirefence]

The lump sum may also affect your Medicare part B premium for one year as well as your Medicare RX premium.
Hope that is not the case but be prepared if you get an increase letter.

[wallerjerry]

Are you sure the proceeds from our settlement reflected on the W2 form can not be used to qualify for a tax deduction with an IRA contribution? It is shown as a non qualified plan contribution and as such, I thought you could use it to make the maximum $6,500 contribution for me and another $6,500 for my wife (who does not have any sort of retirement plan or pension). I will consult with my tax advisor but in using the IRA worksheet, I do not see any thing that restricts this income from being eligible to support a tax deductible IRA contribution.

Jerry

[dwhisenant]

I am not a tax expert, only know what I have done in the past and what Turbo Tax tells me.

In the past, the only income considered earned income was the amount reported on the W-2 for life insurance. This meant that I could only contribute to either mine or my wife's IRA an amount equal to the insurance amount that had SSA and Medicare taxes due, lines 3 & 5 on the W-2. The amount shown on line 11 is not considered as "earned income". This year I tried to do the same but Turbo Tax said I had exceeded the income limit, because of the lump sum, to make any deductible contribution to an IRA.