Benefits Paid Without Benefit Elections

[Dougsbpc]

A small defined benefit plan (husband and wife only) terminated effective 12/31/2007. They signed the termination amendment November 1, 2007 and immediately rolled over all assets ($810,000) to one IRA (i.e he forgot his wife who is due $150,000). The owner and trustee never bothered to contact us.

As long as everyone involved is agreeable, this should be relatively easy to fix. We would have them transfer back the original amount from the IRA back to the plan, prepare proper benefit elections and have them make the distributions.

Does anyone see a problem with this? Does this require VCP? Perhaps it would as the IRA custodian would prepare a 1099-R for any amount transferred back to the plan.