joshgoldeneagle

Hello, Thanks for all the excellent detailed information. So can someone refresh me on the tax penalty(s) I might pay if I decide to keep the $6000 in the IRA?

Here are the key parts of the letter I just received: "...As part of the annual audit process, it was discovered that the Other Investment account did not have earnings properly credited to all participants. The revised ESOP statement shows the proper crediting of the earnings, and is an accurate picture of your 2013 account in the ESOP. Also enclosed is the 1099-R From documenting your correct distribution from the ESOP... If you rolled over your distribution to an IRA or another Retirement Plan, a letter has been sent to your IrA provider or REtirement Plan requesting reimbursement of the overpaid amount. Should you have any questions do not hesitate to call me..." Here is text of the letter to the company that holds my IRA received: Dear Sir or Madam: We hereby indemnifies and hold harmless (IRA provider company name) against all loss, liability, costs, actions, suits, damages, charges or expenses, which you may incur by reason of returning an overpayment of benefit to (my name). Employee (me) was overpaid his benefit from the above mentioned retirement plan in error. Therefore, the amount of the overpayment should be paid back to the retirement plan. Please make the check payable to (employer name)... If the overpayment is not repaid, the IRA to which these amounts were rolled could end up being taxed in its entirety, as an ineligible amount was deposited to it. Thank you for your cooperation in this matter."

Hello jpod, Apparently I am getting something in the mail from my former employer in the next few days. Yes I could certainly ignore it, and see if they threaten legal action or send to collections agency. For now I will just see what the letter says if and when it arrives.

David, I will definitely want to see documentation of the exact nature of the overpayment in writing. Lou, If I repay I will do trustee to trustee transfer. I will not take any distribution. Jpod, I will pay them back if it was an honest mistake on their part, even if I could get away with it. But I need to understand the exact nature of the mistake clearly. I just don't want to take a distribution, and pay a tax penalty for something that wasn't my error. Thanks for the info!

One year ago I received ESOP distribution from my former employer that I rolled over to a traditional IRA. Today I received a phone call from the company that maintains my IRA saying that the employer overpaid, and that want $6000 back. If the error is correct, I have no problem giving back the money, but I obviously I do not want to pay tax penalties for making an early withdrawal from IRA. Will there be tax penalties, and if so, who would be responsible for paying the penalties? Were does the law stand in this unusual case? Is the law different in different states? I live in Oregon.