return of distribution check

[Guest lindamichals]

I have a situation whereas the participant elected to have his distribution made to his new ee's plan. However, he did not do his homework and his new ee does not accept rollovers. This transpired in Feb,05. He said he would set up an IRA. It is now June and my plan sponsor has not heard back from him regarding this IRA. She wants to re-deposit the distribution back with the plan's investment(he was not 100% vested, his account was not forfeited, therefore still has an account balance) and wait until he contact her again with distribution instructions. Any problem in doing this? The distribution amount is $445! Thanks.

[david rigby]

Review plan provisions and written administrative procedures.

It appears he made an election to have a distribution, but the payee of the check is incorrect (due to simple error). Simple remedy might be to void the check and re-issue it to his IRA, or to him (less withholding).

[Guest lindamichals]

the problem is he has not gotten back to the plan sponsor as to where he has(if) set up the IRA. I told the plan sponsor to issue him the check less withholding, be she wants to re-deposit it back to the investment company. What are the consequences of re-depositing after 4 months is my question.

[mbozek]

After a certain period of time an uncashed check becomes stale and cannot be accepted for deposit. It may be as little as 3-4 months. Your client can wait until the check becomes stale and then void the check to restore the account balance of the participant for a subsequent distribution.