Re IRS Form 1099-R. The amount in my Box 5 is greater than difference between Box 1 and Box 2a. Shouldn't amount in Box 5 equal difference between Box 1 and Box 2a?

Part of the confusion regarding Box 5 on IRS Form 1099-R comes from the title the IRS has assigned to the box: “Employee contributions or insurance premiums.” Some people think we are deducting this amount from our payments; others have asked about insurance. 

 

However, the amount shown in Box 5 is not a deduction. The easy explanation is, Box 1 shows everything paid to you last year. Of that amount, Box 2a is the taxable portion, and Box 5 is the portion that is not taxable.

 

For monthly pension payments, the taxable amount is the gross amount minus a portion of the previously taxed amount. 

 

The value on the 1099-R calculates the previously taxed amount using the “Simplified General Rule” or the “General Rule” and life expectancy tables from the IRS. The result is a “recovery” that extends over your expected lifetime or over the joint life of you and your spouse (if applicable). 

 

(Note: Pensions that started before 1987 followed different rules.)

The amount in box 5 is permitted to be greater than the difference between box 1 and box 2a when there is a total distribution.  This could happen if you had losses in the plan.