Employer made rollover distribution instead of RMD

[Guest fcdeacy]

Question:

What is an employer to do if they made a rollover distribution for an terminated employee over the age of 70 1/2 instead of making the Required Minimum Distribution????

Thanks in advance for your comments.

Fred

[Guest fcdeacy]

Question:

What is an employer to do if they made a rollover distribution for an terminated employee over the age of 70 1/2 instead of making the Required Minimum Distribution????

Thanks in advance for your comments.

Fred

[SoCalActuary]

Failed to operate the plan according to its terms. Self correct if possible.

One choice - write the IRA trustee and get return of amount due participant.

Second choice - write the participant for same.

[Blinky the 3-eyed Fish]

I don't see it as an operational failure at all. The plan made a distribution that satisfied the MRD. It's just that the MRD got rolled over into the IRA. The problem is with the IRA now. I think all you need to do is contact the participant and the IRA Custodian and inform them that a portion of the rollover was ineligible to be rolled over. The 1099-R should reflect the taxable distribution and the rollover.

[Appleby]

I agree with Blinky,

... the RMD amount just represents an ineligible rollover contribution, subject to correction by a ‘return of excess contribution’ from the IRA. Technically, the direct rollover is a distribution, which unfortunately included the RMD amount. Therefore, the plan did satisfy the RMD.

The first distribution from the plan (during an RMD year) always include the RMD. Therefore, returning the amount to the plan would not be a solution, as the direct rollover amount already represents or include the RMD amount