Correction of Erroneous Distribution, Nongovernmental Plan Options

[SarahB]

Tax exempt entity sponsors 457(b) plan. Due to administrative error, plan sponsor processed a distribution request for a retired participant who should not have received a distribution for another 3 years, because participant had elected upon retirement to defer commencement date. The distribution was rolled into an IRA. Any ideas on the proper way to correct? Recoup from the IRA with earnings? I know that EPCRS is not available for nongovernmental plans. My take is that the distribution constitutes a failure that would make the plan ineligible, given that the 457 regs provide that an election to defer commencement date is irrevocable.

[mbozek]

Tax exempt entity sponsors 457(b) plan. Due to administrative error, plan sponsor processed a distribution request for a retired participant who should not have received a distribution for another 3 years, because participant had elected upon retirement to defer commencement date. The distribution was rolled into an IRA. Any ideas on the proper way to correct? Recoup from the IRA with earnings? I know that EPCRS is not available for nongovernmental plans. My take is that the distribution constitutes a failure that would make the plan ineligible, given that the 457 regs provide that an election to defer commencement date is irrevocable.

Distributions from NP 457b plans cannot be rolled over to an IRA. Participant needs to take distribution from IRA and pay taxes and penalty on it which leaves the Q of why he should pay plan back after he has been taxed on distribution.