JP Morgan Lawsuit Settlement Funds

[Chris268]

Hello!  

My clients have received settlement funds from a class action lawsuit against JP Morgan 401K Plan.  

The letter that came with the check states that taxes were withheld and a 1099-R would be issued.  No 1099-R was received.

I called the hotline number and it is all old news.  There is no human available and it just repeats the same message that taxes were withheld and see your 1009-R and tax advisor for more help.

I emailed JP Morgan and they said it was treated the same as a 1099-MISC.  If it was less than $600 then no taxes were withheld and no 1099 of any type was issued.

I think this should be reported on the 1040 on Line 4 for pensions but I don't think that's possible without the 1099-R.  I have included it on Line 8 of Additional Income as Other Income. 

Does anyone know the correct way?  Is there a better way, and does it even matter? 

Thanks! 

[PATAX · Accepted solution]

If a 1099-r was not received then you may not want to include it on the pension line since it will not match up with IRS records. I think it should be picked up as miscellaneous income. Just my opinion

[sjrcpa]

You could mock up a 1099-R. The EIN must be floating around somewhere. Maybe client has gotten 1099-R in the past from them.

[BobKamman]

Sounds like the makings of another class-action lawsuit.  Have you tried contacting the lawyers that settled the first one?

Taxes were withheld?  Do you know how much?  

Maybe a Form 4852 as a substitute 1099-R.

Remember, J. P. Morgan made his money the old-fashioned way.  He cheated.  He bought defective rifles from the Union Army in the East, during the Civil War, and sold them at a profit to the Union Army in the West.  Not much has changed since those days.  

[qbteachmt]

"I think this should be reported on the 1040 on Line 4 for pensions"

But it isn't "from" the pension. It's "from" the settlement.

Here's what the web shows:

"Settlement payments were made to eligible current Plan participants via a credit to your account on Monday, December 21, 2020.

Checks were mailed to eligible former Plan participants, or eligible Beneficiaries and Alternate Payees, on Friday, December 18, 2020. Please allow for two weeks for the delivery of your check."

"Class Members are eligible for cash benefits that are deposited into one or multiple investments that were at issue in the JPMorgan ERISA violation class action lawsuit. Class Members do not have to submit a claim form to receive benefits.

Class Members who no longer have 401(k) plans with JPMorgan Chase are still eligible for benefits.

In the case of former policyholders, if they wish to have their benefits deposited into a different retirement account, they must complete, sign and mail in a Former Participant Rollover Form by Sept. 12, 2020. If a former policyholder does not submit this form, they will receive their settlement benefits in the form of a check."

[Chris268]

I did not contact JP Morgan.  I contacted the phone number listed for the JP Morgan Class Action lawsuit, which would be the attorney's office.

I don't believe any taxes were withheld.  I considered grossing it up by 20% but if nothing was withheld that would mess up everything.  I am satisfied that no taxes were withheld and there is no 1099.

[Chris268]

I wonder if they had two completely separate taw suits then, because these checks were received on May 14, 2020.  The clients were former participants not current.  There was nothing even close to what this says on the website that I was sent to and the forms had to be mailed in June of 2019.  The checks were received in May, 2020.

It doesn't matter.  It is the same idea.  The funds aren't from the pension itself.  The client's pension was actually rolled over into a different plan long before this lawsuit.  It is from the settlement.

It has no effect on Minimum Distributions or early penalties.  I think is is Other Income.  

[Chris268]

Just so you know, I am a CPA and I have been doing taxes for 30 years and have NEVER done that.  If there is no 1099, then my clients or sometimes me, have to obtain it from the source.  In this case there is no 1099 because it is not pension funds.  It is settlement funds.

[BobKamman]

Is this the Beach case, involving the JPMorgan Chase 401(k) Savings Plan? 

Edited -- Apparently not, after reading another response below.  Yes, there was a similar case, which appears to involve multiple pension plans at multiple employers, with funds invested in Chase securities.  That's the Whitley case -- is that what you are dealing with here?

[BobKamman]

@Chris268  "I think this should be reported on the 1040 on Line 4 for pensions but I don't think that's possible without the 1099-R.  I have included it on Line 8 of Additional Income as Other Income."

Certainly possible under tax law, maybe not possible under IRS and commercial software rules.  I did look it up, and a 1099-R is required for any payments of $10 or more.  It would help if you would name the case -- JP Morgan has lots of class-action irons in the fire.  

[qbteachmt]

Let me point out something, please: "In this case there is no 1099 because it is not pension funds. It is settlement funds."

1099-R and/or 1099-Misc? Because a lawsuit settlement would be 1099-Misc. The -R would be used for distribution from a retirement plan. -Misc is for lawsuit settlement.

"I wonder if they had two completely separate taw suits then"

I'm finding lots of them 🙂

"and the forms had to be mailed in June of 2019. The checks were received in May, 2020"

That would be this one, then:

https://www.jpmsvfclassaction.com/

https://www.pionline.com/courts/jp-morgan-chase-agrees-9-million-settlement-401k-suit

You would not gross up anything. You already know the Gross is what they got.

[BobKamman]

That's not the case -- you don't get a check in June when the preliminary settlement is just filed in May -- but the pattern does seem to be that the bank, and not the pension fund itself, is making the payments, so the 1099-MISC would be appropriate.  There may have been a few where the money went to the pension fund but the account had been closed out shortly before the money arrived.  

[qbteachmt]

"There may have been a few where the money went to the pension fund but the account had been closed out shortly before the money arrived."

Which makes it ordinary taxable income, either way. One thing it clearly won't be is distribution from an active account as retirement.

[BobKamman]

I would demand a 1099-R from the pension fund so that the income could be spread over three years.  

[Chris268]

The claims were filed in June, 2019.  The payments were received in May, 2020.

[Chris268]

Thank you.