Can IRA owner rollover error be repaired during current tax year cycle?

In February, 60 year old IRA owner takes $8,000 distribution.

In March, replaces funds as a “Rollover Contribution”.

In December, changes IRA custodians,

UNFORTUNATELY,

Original custodian sends check made out to IRA owner’s name (e.g. a rollover) instead of new Custodian’s name (e.g. a custodian-to-custodian transfer).

IRA owner deposits check in new IRA with Custodian B.

Since IRA owner has not completed tax forms for the year, can he remedy through re-characterization?

For example:

Re-characterize $6,500 of the $8,000 March Rollover Contribution as a Regular Contribution,

Withdraw the extra $1,500 as an excess contribution,

Deposit the extra $1,500 as a regular contribution to spouse IRA to mitigate the income tax?

Or are other remedies available, given that this is within the current tax year cycle?

A participant lives with his brother who is the property owner. The brother is facing foreclosure. Can the participant take a hardship withdrawal to help his brother under the reason "payments necessary to prevent the eviction of the employee from the employee's principal residence or foreclosure on the mortgage of that residence". I think no because he is not the legal owner. Would like another opinion.

I am having a difficult time decoding how to distribute a loss.

We have an employee who deferred $1,000 into his 457 plan. The plan allows $18K in contributions for the year, which can be a combination of employee and employer monies.

In December we forecast that the employer contribution for the year would $18K. Our practice is to maximize the employer contribution first, thus we wanted to return to him his deferral amount. The $1,000 was returned to him via a negative contribution in December on his payroll. We did this in order for the w-2 to show that he did not contribute the $1,000.

After the return we calculated the gain/loss, and found that the $1,000 deferral he put into his account had shrunk to $900. This $900 was moved out of his account into what we call the negative account at the recordkeeper.

I understand that the excess deferral instructions state that the excess deferral plus any income allocable must be distributed out. We've taken a conservative view and determined that "income" includes losses as well as gains.

In order to distribute the loss to the participant, my thought is that we now instruct the recordkeeper to move an extra $100 out of the account. This would in effect make the loss realized in his account, and thus would mean the loss was allocated (I think).

Not sure if this is the best way, or only way, to administer. Would appreciate any insights.

Thanks.

I am having a difficult time decoding how to distribute a loss.

We have an employee with a $1,000 excess deferral. (I am using round numbers for sake of ease). We need to return this deferral to him along with any allocable income. Our ERISA attorney states that 'income' means losses as well as gains.

The $1,000 excess was returned via a negative contribution on the payroll account. The rationale was that the w-2 needed to diminish his deferral by $1,000.

The $1,000 deferral he put into his account shrunk to $900 as of the date of return. This $900 was moved out of his account into what we call the negative account at the recordkeeper.

My thought is to now instruct the recordkeeper to move an extra $100 out of the account. This would in effect make the loss realized in his account, and thus would mean the loss was allocated (I think).

Does this approach make sense?

Looking for some opinions on the following unique situation...

Mark retired from Company A in 1998 and was receiving pension payments. In mid-2015, he was told he had a terminal illness and given only a few months. In his desire to assist his children/wife with dealing with his passing, he contacted Company A to learn what his wife needed to do after his death for her surviving spouse benefits. As a result of his call, Company A learned they had an administrative error and had been paying him as a single annuity since 1998, resulting in an over payment of $28K. He passed a few weeks after this call. Company A was notified of his passing and no future payments were made.

Now, Company A is requesting his wife repay the $28K overpayment in lump sum, or actuarialy offset her surviving spouse benefits to pay it back over time.

in my opinion, Company A should only be able to request repayment from the "estate of", and not from the surviving spouse. In the event there is no "estate", then Company A suffers a loss due to their administrative error.

Interested in hearing opinions and thoughts about related laws. Much thanks!

A Participant of a 401(k) plan has just brought the Plan Administrator's attention now after 8 years (completed an election form in 2008) that his/her deferral election has not been implemented. My question is; is there a statute of limitations since it has been 8 years. He's obviously seen his paycheck stub and has seen no deferrals being taken out. Not to mention the filing of his taxes and W-2 form for 8 years. The investments are semi-bundled with John Hancock so he would even has access to his account daily.

I'm thinking there is not a statute since the IRS says to "correct the plan as if the error never occured", but really? This is nuts!

If there isn't a statute of limitations, then at this point the only correction since this is going back to 2008 would be to use EPCRS "missed deferral opportunity" and file a VCP. Even though this is just one participant, it probably wouldn't fall under SCP. Around 53 participants, assets greater than $2 million and it's a safe harbor plan with Enhanced Match to boot.

Thank you!

I have a new plan, started by a 75 year old owner, in 2014. He had no account balance as of 12/31/2013, and a $2,000 account balance as of 12/31/2014. He is required to take an RMD for 2015, but can he postpone the first RMD to April 1, 2016, even though he is 76 years old in 2015 and not 70-1/2?

Employer made election in 2010 to use Market Value of Assets for PPA funding. Can employer now elect to use Average Value of Assets without any strings attached? Thanks.

This is technically a hypothetical, but when it came up I didn't have an answer:

We've all had the cases where the participant's beneficiary form is old and doesn't match the current legal beneficiary (cases of re-marriage being the most common). So let's say the plan beneficiary designation form has Spouse 1 as the beneficiary, but Spouse 2 is the current for-all-purposes-outside-the-plan legal beneficiary, and they are both less than 10 years younger than the participant. Whose DOB should be used for calculating the plan RMD?

Just curious.

Plan has a safe harbor match only - no other er contributions (other than discretionary contributions).

Have a plan with around $10,000 of "forfeitures" being generated related to a correction to Safe Harbor Match (they used comp over the a17 limit).

The IRS prohibition of using forfeitures for SH is based on the fact that the contributions needed to be 100% vested "when made." These were, as they were intended to be SH Match. Anyone have a problem using this to offset the match? The Plan is not audited, and $10,000 is about 5 years of my fees!

I would assume this has come up before, and perhaps addressed by the IRS?

What are the consequences of depositing 2016 employee deferrals into the plan in December 2015? Tax and plan years are both calendar year. We have confirmed that the 2016 W-2 will reflect these deferrals.

Thanks.

Please help set me straight. I totally confused myself with a QACA that excludes bonuses and car allowances for all contributions, including elective deferrals and the QACA basic matching contributions.

I know that compensation eligible for the deferrals must be safe harbor compensation defined in section 414(s) and 1.414(s)-1. I'm confused if the plan may use this definition of compensation and pass the 414(s) nondiscrimination test each year to determine this definition of compensation satisfies section 414(s) (under 1.414(s)-1(d)(1) or if the plan by design cannot exclude these types of compensation and can only modify the compensation under the rules in section 1.414(s)-1©.

Please confirm if the plan design to exclude these types of compensation is permitted under a QACA and performing the 414(s) test is the acceptable method to determine the definition of compensation is nondiscriminatory.

It was discovered that a few participants in a governmental defined benefit plan had compensation over the 401(a)(17) limit. Benefits were within 415 limits.

This resulted in an overpayment for a few participants who have retired but also in employer pick up contributions that were higher than they should have been. There seems to be a good amount of guidance (including last year's revenue procedure) and opinion out there on how to correct the overpayment. BUT

How can the pickups be corrected? Assume that they involve years prior to 2015. My immediate thought was that the appropriate correction would be to 'forfeit' under the plan - meaning the employee would not have credit for them - which in this case really boils down to whether contributions would be paid out to a beneficiary if the participant died before receiving annuity payments at least equal to his or her contributions. Then the "Employer", in this case the municipality, would need to make the employee whole for the deduction that was taken from pay in error. The payment to the employee would be reported on a revised W-2 for each applicable calendar year, and the employee would need to re-file taxes for those years.

Is there a better (easier) answer? Something that doesn't involve re-filing individual income tax returns?

Also, could it be possible - consistent with EPCRS principles - to offset the overpayment by the over-contributions? For example, the plan overpaid you $5000, but you overpaid the plan $2000, so you need to pay back $3000 to the plan.

Errors are very small relative to the plan size and involve only a few plan years. The intention is to self correct, not to submit under VCP. (It's understood that the plan wouldn't have reliance on the correction method without VCP compliance statement.)

If a participant must receive payments at NRA to avoid an impermissible forfeiture of their benefit (say they are hitting the high-3 415 compensation limit) must these payments be considered "annuity payments" that are taxable -OR- can these payments be considered a partial lump sum eligible for rollover (non-taxable) status ? Thanks for any opinions.

Hi,

I am trying to upload a year-end report form American Funds. American Funds doesn't help as they say that they don;t work with FT. Williams. FT Williams gave me an outdated link and finally asked that I give them updated instructions when I figure out which report it is.

Does anyone know which report is used for FT. Williams?

Thank you.

Co. A owned 100% by Person Z. W,X & Y are the employees. Co. A sponsors a 401(k) plan.

Person Z (90% ownership) partners with Person Y (10% onwership) to form Co. B. There are not any employees other than Y & Z. Co. B does not adopt Co. A's plan.

It is my understanding that Person Y is an hce in the Co. A 401(k) plan because of his ownership in Co. B and the fact that Co. B is not a participating employer does not change that determination.

Am I missing anything?

Thanks for any guidance.

The plan is a safe harbor match, with on going safe harbor matching contributions.

The plan inadvertently miss calculated the match for 5 participants IE the five participant received to much safe harbor match.

Is the proper way to correct the excess match to forfeit the excess match to the plans forfeiture account (calculate gains/losses). The forfeiture safe harbor match can only be used to offset plans expenses going forward.

Participants deferred a significant amount from deferred comp payouts that was ineligible for contributions during 2015.

We have done the "pay the distributions in 2016" to correct this sort of thing when the correction was a few hundred dollars or maybe $1,500. This will be almost $10,000. Does that option get pulled off of the table in that scenario?

Can a majority owner that is in-service and past NRA and elects to receive a monthly annuity, or alternatively elects a LS but only receives the allowable monthly annuity due to the 110% restriction, then after commencement of the monthly payments waive that benefit in order to make the plan sufficient for termination? This is a PBGC covered plan.

We have a 457(b) plan where we match 10% of an employee's elective deferral.

I know that the 457(b) employee contribution is state taxable in PA but what about the 457(b) employer match?

The match is 100% vested immediately; we match each pay period

Thanks

Lexy