Overpayment from 401(k) plan

[Guest sheTexasHammer]

If an employer makes an overpayment from a 401(k) plan to a participant in a lump-sum distribution, and attempts and fails to recoup the overpayment, are there any reporting requiremetns on part of the employer to the IRS? I think the answer is that the employer must file an amended 1099-R including the overpayment as a "taxable amount?"

[Jim Chad]

I believe you are right about the 1099. And if it went directly to an IRA or other qualified plan I would send a notice to them that part of the money is not eligible to be in an IRA.

[Peter Gulia]

Some plan administrators inform the payee that the portion not rolled over, including the mistaken-payment portion not rolled over because it wasn't eligible for rollover, is subject to income taxes AND, if contributed to an IRA, an additional excise tax on excess contributions.

If the payee purportedly made a "rollover" into another employer's plan, the mistakenly-paying plan administrator demands that the other plan return the amount that was mistakenly paid to it.

[Guest sheTexasHammer]

ok, so I assume that the participant did roll-over the amount into an IRA. And the plan administrator has already tried to get the money back, and has failed. What I am interested in is the plan administrator's duties to report to the IRS? It is just the 1099-R right? What about going through the VCP program under EPCRS?

Thanks for the help.

[Belgarath]

If $100.00 or less, then no correction required under RP 2008-50, 6(.02)(5)(d). If greater than $100.00, see Appendix B, 2.04. This shouldn't generally require a VCP filing.

[QDROphile]

Does EPCRS still require the notice to the former participant that the excess amount is not rollable and that penalties attach if the excess is not withdrawn from the IRA?