402(g) Refund after 4/15

[Bruddah Kimo]

Aloha!

Situation - I have a new 401k client having their recordkeeping done on a fund groups platform. I was informed by the client that an audit revealed one of their participants exceeded 402(g) in 2006. I prepared a distribution request with instructions to use Code 8 on the 1099-R and sent it to the recordkeeper who prepares the distributions. The recordkeeper (big national firm) gets the form and tells me they will not process the distribution until I confirm the plan is using EPCRS and the 1099-R code will be 'E'. This makes absolutely no sense to me......I maintain it should be code 8 for the full amount and there is no need to use EPCRS. Am I missing something obvious? Anyone have a similar situation - thought I would see if anyone has a comment!

Mahalo nui!

[Tom Poje]

its the law. you have to have a distributable event such as termination, age 59 1/2 in service withdrawal, etc. once you get past the April 15 deadline.

see 1.402(g)-1(e)(8)(iii)

I think its because the IRS are a mean one, Mr Grinch!

[Bruddah Kimo]

Geez Tom - I really missed the boat on this....I was so concerned about the tax coding and earnings I didn't think about the distributable event! So no distribution is necessary - so no problem! Thank you for your insight!

[401_4_ever]

Please note this money is still taxable in 2006, even though it won't be distributed. Any 402(g) excess that doesn't get distributed by 4/15 is taxable TWICE, once in the year deferred, and then again in the year distributed. Makes for a very unhappy participant.