1. US Payroll Year-End Processing Guide
  2. Pension Employee Pay Types

Pension Employee Pay Types

You set up pay types for 1099 processing to accurately allocate earnings, other than wages, for pension employees.

The Payroll system supports the following IRS-approved types of pay for 1099-R forms. The IRS-defined special handling code for each type of pay appears in parentheses. These distribution types are reported in Box 7 of the 1099-R form. On the U.S. Legislative/Regulatory form, enter the appropriate code type in the W-2 Special Handling Description field.

  • Early distribution, no known exception (1)

  • Early distribution, exception applies (2)

  • Disability (3)

  • Death (4)

  • Prohibited transactions (5)

  • Section 1035 exchange (6)

  • Normal distribution (7)

  • Excess contributions taxable in 2010 (8)

  • Cost of current life insurance protection (9)

  • 10-year tax option eligibility (A)

  • Designated Roth Account Distribution (B)

  • Reportable Death Benefits under Section 6050Y (C)

  • Excess deferrals taxable in 2008 (D)

  • Employee Plans Compliance Resolution System EPCRS (E)

  • Charitable gift annuity (F)

  • Direct rollover and rollover contribution to IRA (G)

  • Direct Rollover of Roth IRA (H)

  • Early distribution from a Roth IRA (J)

  • Loans treated as distributions under section 72 (p) (L)

  • Qualified Plan Loan Offset (M)

  • Recharacterized IRA contribution made in 2010 (N)

  • Excess contributions plus earnings taxable in 2009 (P)

  • Qualified distribution from a Roth IRA (Q)

  • Recharacterized IRA contribution made for 2009 (R)

  • Early distribution from a SIMPLE IRA in first 2 years, no known exception (S)

  • Roth IRA distribution, exception applies (T)

  • Employee contributions (Blank)

  • Dividends distributed from ESOP under Sec 404K (U)

  • Charges or payments for purchasing qualified long-term care insurance (W)

To transfer pension employee information to the workfile build program, the system requires this information for each pay type that you use to pay pension employees:

  • Pay type code.

  • Special handling description.

  • Tax exempt status.

After you set up pay types for pension employees, you enter the employee's pay-in-time entry and process it through the payroll cycle. The system prints checks and loads the pay amounts to history. To correctly process 1099 forms, you should use this process to load history amounts.

Run integrity reports to verify that dollar USD amounts are correct and that tax calculations, if necessary, exist. Before running the workfile build, make the necessary corrections to the history tables.

Note: On 1099-R forms, any amount that represents federal wage in the Federal A record of the Tax History table (F06136) is reported in Box 2a as long as the gross distribution is taxable. If no federal wage exists, the amount of the gross distribution, as set up in special handling for Box 1, is reported in Box 2a if the gross distribution is an IRA. The system also derives the federal tax withheld amount from the Tax History table.