Distribution & Benefit Payment Testing
Recalculate expected net distribution, evaluate accordance with plan documents, and tie the gross amount and tax withheld to Form 1099-R.
Recalculates expected net distribution (gross minus taxes, fees, forfeitures), evaluates accordance with plan documents, and ties the gross amount and tax withheld to Form 1099-R.
Purpose
To verify that distributions and benefit payments were authorized, calculated correctly, and paid to the right participant in the right amount, and that each distribution was made in accordance with plan documents and properly reported on Form 1099-R.
Procedures
- Select distributions to test from the plan's disbursement ledger or trust statement. Enter the participant name, distribution date, and recorded payment amount for each sample item.
- Obtain the signed distribution request form, check stub or transfer confirmation, and Form 1099-R for each sampled participant.
- Recalculate the expected net payment from the distribution form (gross distribution minus taxes, fees, and any forfeitures) and agree the result to the actual payment per the check or transfer record.
- Evaluate whether each distribution was made in accordance with plan documents, and confirm that rollover payments were directed to a qualified plan or IRA custodian.
- Agree the gross distribution amount and federal tax withheld to Form 1099-R and verify that the distribution code is consistent with the distribution type.
Engagement Variables
These are set by EBP Plan Analysis and referenced automatically when this procedure runs.
| Engagement Variable | What it provides this procedure |
|---|---|
| Loans & Distributions Overview | The plan document sections governing distributions and benefit payments: eligible distribution events (separation from service, disability, required minimum distributions, hardship), the plan's vesting schedule, any loan provisions that affect distribution eligibility, and applicable waiting periods or administrative requirements. Used as the policy source when evaluating whether each distribution was made in accordance with plan documents. |
Your selections
| Selection | What to enter | Why it matters |
|---|---|---|
| Employee Name | The participant's full name as it appears in the disbursement ledger or trust statement. | Used to match all three document groups (distribution form, check or transfer, and 1099-R) to the correct participant. The name must be consistent across documents. If the plan's disbursement records use a different name format than the participant statement, confirm before running automations. |
| Distribution Date | The date the distribution was processed or paid, as recorded in the plan's disbursement records. | Scopes the document match to the correct event. When a participant has multiple distributions in a period, the date is the primary differentiator between transactions. Enter one row per distribution event; do not combine multiple distributions into a single sample row. |
| Distribution Amount | The net distribution amount as recorded in the trust statement or disbursement ledger. The amount the plan shows as paid. | The recorded amount Agentive compares against the recalculated expected net payment from the distribution form. Any difference between these figures surfaces potential errors in withholding calculations, fee deductions, or forfeiture treatment. |
Documents to provide
| Document | What to provide | Key data extracted |
|---|---|---|
| Distribution Form | The signed distribution request form submitted by the participant. Must show the participant name, distribution type, gross amount requested, elected federal tax withholding percentage, any fees, and any forfeiture amounts applied. | Distribution type, gross amount requested, federal tax withholding percentage, fees, and forfeitures. Agentive recalculates taxes (gross × withholding %) and computes the expected net distribution: gross minus taxes minus fees minus forfeitures. |
| Check / Transfer Confirmation | The check stub, ACH payment record, or wire transfer confirmation reflecting the actual payment made. Must show the total payment amount and the payment date. | Actual distribution amount paid. Agentive computes the difference between the expected net payment (from the distribution form) and the actual amount paid. Also evaluates whether rollover payments were directed to a qualified plan or IRA custodian. |
| Form 1099-R | The Form 1099-R issued to the participant for the tax year of the distribution. Must be the final issued form, matched to the participant by name. | Gross distribution (Box 1), taxable amount (Box 2), federal income tax withheld (Box 4), state taxes withheld (Box 14), and distribution code (Box 7). Agentive also returns an explanation of the distribution code to help confirm it is consistent with the distribution type on the form. |
Don't have these exact documents?
Use Co-Audit to change which documents this request asks for, and to adjust the procedures and calculations that read them, so the workflow matches what your client actually provides.
Testing attributes
Judgment-assisted result; auditor confirms before concluding. Agentive surfaces the relevant plan rule and explains its evaluation, but the auditor reviews the reasoning and records the final determination.
| Testing Attribute | What it tests and what to review |
|---|---|
| Net Distribution Agrees to Payment | Compares the recalculated expected net distribution (gross minus taxes minus fees minus forfeitures) to the actual payment amount per the check or transfer. Pass if the difference is $0 or within an immaterial threshold. Any non-zero difference requires explanation. Common causes include a fee assessed after the form was signed, a tax election change, or a data entry error in the gross amount. Review the difference and the inputs used before concluding. |
| Distribution Made in Accordance with Plan Documents | A policy instruction. Agentive evaluates whether the distribution type, timing, and eligibility appear consistent with the plan's rules as described in the Loans & Distributions Overview. Pay particular attention to hardship distributions and early withdrawals, where eligibility criteria are most likely to be at issue. |
| Rollover Directed to Qualified Plan | For rollover distributions only. Confirms that the payment was made to a qualifying plan or IRA custodian rather than paid directly to the participant. Returns N/A for any distribution type other than a rollover. If the check or transfer shows payment to an individual rather than an institution, investigate. Some plans process rollovers as participant checks made payable to the receiving plan (a 60-day rollover), which requires additional documentation. |
| 1099-R Issued and Agrees to Distribution Form | Confirms that a 1099-R was issued for the distribution and that the gross amount in Box 1 is consistent with the gross distribution on the form. Also agrees federal tax withheld in Box 4 to the recalculated tax amount. Review the distribution code in Box 7 against the distribution type on the form. A mismatch (for example, a Code 2 exception on what was recorded as a normal distribution) may indicate a classification error requiring follow-up with the plan administrator. |
Update with Co-Audit
Real client data rarely matches a template exactly. When the documents you receive, the way a plan handles forfeitures, or a situation you hit during review differ from what this template assumes, use Co-Audit to retool the request. Describe what is different and it rewrites the document groups, AI Prompt Columns, and calculations to fit.
Situations where Co-Audit helps with Distribution & Benefit Payment Testing:
- The plan pays the full gross distribution and handles forfeitures separately rather than netting them out, so the standard net recalculation over-deducts. Have Co-Audit remove the forfeiture term from the expected net payment so the recalculation matches the plan's actual approach.
- State tax is also withheld and the recalculation only handles federal. Have Co-Audit add a state withholding input and fold it into the expected net distribution and the 1099-R tie-out (Box 14).
- The recordkeeper provides a single distribution detail report covering every distribution, with no individual forms. Have Co-Audit rebuild the workflow to read each distribution from the combined report and remove the individual distribution form group.
- Hardship distributions require additional supporting documentation (medical bills, eviction notices) the standard document set does not include. Have Co-Audit add a supporting-documentation group and a column confirming the hardship event is substantiated.
Describe the difference in the Co-Audit panel
For example: "the client only provides a recordkeeper distribution detail report; rebuild the workflow to read each distribution from a single combined report and remove the individual distribution form group."
Let Co-Audit update the workflow
It revises the document groups, AI Prompt Columns, and calculations.
Review every change
Watch the columns for red text (a broken reference) and re-check any cell that involves math, where the AI tends to copy a number forward instead of recalculating.
For broader detail on tailoring requests and fixing broken column links, see Tailor a request with Co-Audit in the EBP hub. Loan defaults and offsets surface here through 1099-R Code L and Code M; the parallel coverage lives in Loan Testing.
Continue your journey
← Investment Earnings & Valuation Testing
Test investment earnings before distributions.
Loan Testing →
Confirm loans are within limits, validate amortization, and review 1099-R Code L / Code M.
How is this guide?
Investment Earnings & Valuation Testing
Calculate plan-level and participant-level returns on average balance per fund and compare them to surface misallocations, calculation errors, or unauthorized transactions.
Loan Testing
Confirm loans are within the vested-balance limit, supported by home-purchase documentation when the term exceeds 60 months, agree the period-end balance to the amortization schedule, and review 1099-R Code L and Code M.