401(k) Rolled over ti SIMPLE by Mistake.

[jevd]

A rollover occured from a regular 401(k) to a SIMPLE IRA this year. I've check the search function but can't find a specific case.

Facts:

Rollover occured this year, more than 60 days ago, but within 60 days of distribution.

Corrected to state it was a direct rollover.

Funds were deposited to a SIMPLE IRA

Possible Solutions

1. Return as an Excess plus earnings. Client is out of luck for IRA rollover.

2. Re-characterize client reports as being rolled over to traditional IRA.

3. EPCRS and hope for the best.

Does it matter who the Employer is for the Simple?

[masteff]

IRS Pub 590 (pg 70) says: "Traditional IRA mistakenly moved to SIMPLE IRA. If you mistakenly roll over or transfer an amount from a traditional IRA to a SIMPLE IRA, you can later recharacterize the amount as a contribution to another traditional IRA."

While it's discussing monies coming from a traditional IRA, I'd presume the same would apply in your circumstance.

[jevd]

IRS Pub 590 (pg 70) says: "Traditional IRA mistakenly moved to SIMPLE IRA. If you mistakenly roll over or transfer an amount from a traditional IRA to a SIMPLE IRA, you can later recharacterize the amount as a contribution to another traditional IRA."

While it's discussing monies coming from a traditional IRA, I'd presume the same would apply in your circumstance.

I saw that, but am not certain that it applies. Any other opinions? I've found out that it is the same employer and they want to correct by reversing the deposit and returning the funds to the 401(k). Will a self-correction apply

[masteff]

If you read pub 590, I'll assume you also read EPCRS. While this isn't an exact fact pattern provided in SCP, it certainly appears to meet the criteria. Simple's are covered by EPCRS. And the Simple did accept a rollover from a source other than another Simple when the plan document doesn't provide for such, which would meet the general definition of an operational failure.

[Appleby]

IRS Pub 590 (pg 70) says: "Traditional IRA mistakenly moved to SIMPLE IRA. If you mistakenly roll over or transfer an amount from a traditional IRA to a SIMPLE IRA, you can later recharacterize the amount as a contribution to another traditional IRA."

While it's discussing monies coming from a traditional IRA, I'd presume the same would apply in your circumstance.

If I had to vote, then this would be my choice...which could techincally be treated as SCP ...assuming it has been less than 2-years since the error occurred

Reversing the funds to the 401(k) would not correct the error...since the plan processed a direct rollover, as per the participant's request, the funds can only be returned to the plan as a rollover...and that is permitted only if the assets were eligible to be in the SIMPLE -which is not the case…