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Uncleared rollover check


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4 replies to this topic

#1 beppie_stark

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Posted 09 August 2011 - 04:07 PM

A plan participant requested a rollover distribution to his then-current employer's plan. The rollover check was never deposited into the plan. Five years later the plan administrator sends a list of uncleared checks to the plan sponsor. The PS immediately recognizes the payee -- he has been rehired and is a current employee.

The PA says the check must be reissued as a rollover. Payee attempted to establish an IRA to receive but the IRA custodian said no -- the 60-day rollover deadline has passed.

What are the corrections possible?
Beth

#2 shERPA

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Posted 09 August 2011 - 04:44 PM

Who is the PA? Apparently not the employer? Why did the PA wait 5 years to deal with uncashed checks?

Was the check drawn on a plan account or some sort of omnibus account? Do they know the original check was delivered to the participant or the other plan? Presumably since it was intended to be rolled over no taxes were withheld and the participant did not include it in income.

Seems to me the PA or the plan itself still has possession of the participant's money since the check wasn't cashed, the check is stale dated now, so simply reverse the check entry and use the funds to reinstate the account in the plan. It all works out (until the participant asks for make up earnings for the last 5 years, but that's another thread!)
I carry stuff uphill for others who get all the glory.

#3 masteff

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Posted 09 August 2011 - 04:56 PM

the 60-day rollover deadline has passed.

How was the orginal rollover processed? Direct or in-direct? If it was a direct rollover (under 401(a)(31)), then the 60-day rule (under 402©(3)(A)) doesn't apply. In that case, the participant either needs to make the IRA company consult w/ its own legal department or needs to find a different IRA company.

The following PLR reaffirms that a direct rollover is not subject to the 60-day rule: http://www.irs.gov/p...-wd/1005057.pdf
Kurt Vonnegut: 'To be is to do'-Socrates 'To do is to be'-Jean-Paul Sartre 'Do be do be do'-Frank Sinatra

#4 ETA Consulting LLC

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Posted 09 August 2011 - 10:09 PM

the 60-day rollover deadline has passed.

How was the orginal rollover processed? Direct or in-direct? If it was a direct rollover (under 401(a)(31)), then the 60-day rule (under 402©(3)(A)) doesn't apply. In that case, the participant either needs to make the IRA company consult w/ its own legal department or needs to find a different IRA company.

The following PLR reaffirms that a direct rollover is not subject to the 60-day rule: http://www.irs.gov/p...-wd/1005057.pdf


Thank you. There was clearly no constuctive receipt of the funds by the participant. Even if it weren't a direct rollover, the participant could easily establish they never received the check due to it being lost. Remember, the 60 day rule is actually from the date the participant 'receives' the funds; which opens this door for checks that were lost.

Good Luck!
CPC, QPA, QKA, TGPC, ERPA

#5 beppie_stark

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Posted 11 November 2011 - 12:18 PM

Thank you for your helpful responses, especially for the link to the PLR. After some arm twisting the situation was satisfactorly resolved, at least from the participant's viewpoint. The PS is changing PAs due to this and similar issues.
Beth