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Good luck getting the 1099 rectified. Our experience is that 1) it's impossible, and 2) even if you can do it, there are penalties due to the IRS for the "correction." As far as the recipient, while painful, the only approach is to have a discussion with the IRS about the double reporting, having the former employer and perhaps the bank provide documentation that the income was received once, but reported twice.

It's not a question of how it should be, it's a question of what actually happened.

First things first - we have thankfully not encountered this. I suppose the IRS could be fishing - the "applicable period" for turnover CAN be longer than one year if there is a series of related events/terminations. There has been some litigation in this arena, including Matz, but I haven't followed all the back and forth for a while. I believe there have been other cases as well. I'm REALLY hoping your situation is an anomaly, and that the IRS hasn't started some @$**%$ "initiative" or test in this arena.

Assuming he worked enough hours each year to earn a year of service (also assuming that the plan uses the counting hours method for vesting, and that the vesting computation period is the plan year, and that there are no predecessor plan issues, and that he has not reached his normal retirement date under the plan, etc, etc) 7/1/19 - 6/30/20: 1 year 7/1/20 - 6/30/21: 2 years 7/1/21 - 6/30/22: 3 years Looks to me like he will be fully vested before his RBD regardless of any break in service rules.

Why wouldn't he be 100% vested?

You should clarify your role with the former client as it may affect the advice you provide. Do they want you to look at everything, soup to nuts? Review the plan "termination", the "merger" or transfer, the receivable issue and anything else related? To give proper advice you should tell them this is what you need to do and what it will cost. OTOH, if they are just asking you if they can deposit the receivable to the surviving plan without reviewing anything else, you should caveat your response that it is not based on a complete review of the situation and might not be correct. That said, can they do it? Probably, as Bird notes, under a merger it should be OK, but even if it was terminated and transferred, under the principles of self correction it's probably good enough (but IRS could take a different view under exam). There may be some make-up earnings due as well, but unless they want to engage you to figure out if so and how much, i'd just point this out. And presumably Company A adopted the surviving plan? As Bill says there's a good chance something was done wrong, you can be helpful, but just be clear on the limitations of your assistance.

Was it terminated (and presumably balances voluntarily moved to plan B) or was it merged? Your description has a contradiction in it. If it was merged then I'd say no doubt Plan B can accept the contribution. If it was terminated then the proper thing to do would be to re-open the plan and give everyone the option of what to do with their (new) money. (Not speaking to other potential issues if it was terminated.) Although practically it probably makes sense to just deposit the contribution to Plan B, but definitely make that someone else's liability/problem by explaining that it isn't "right."

You're a very optimistic man, John.

Just change with the next filing. Document the change in your notes and with the client (like in a cover letter) along with the reasons why. I like these guy's summary of the reasons: https://www.retirementplanners.com/post/the-right-way-to-file-the-form-5500 I've seen this change done (and vice versa) once for plans and never heard of any issues. I don't think you will either.

If the advisor is associated with a securities broker-dealer, consider whether you might politely invite the advisor to consider how a never-mind or undo could call into question the advisor’s conduct. (At many broker-dealers, an undo soon after setting up an account would trigger the compliance office’s investigation into whether the advisor had followed sales-practices and disclosure protocols.) About a different path, will the plan’s directed trustee or custodian allow a payment without a written direction or instruction that shows a satisfactory reason for the payment?