Erroneous rollover

[Belgarath]

I've never seen anything quite like this.

Plan termination. Participant has $20,000 account balance. Elects to receive $5,000 in cash, and roll over the $15,000 remaining to her new 401(k) plan at new employer.

Distribution is processed, but unfortunately the entire $20,000 is sent to the new 401(k) plan and accepted and deposited.

New 401(k) plan does not allow for in-service withdrawals/distributions, and initially at least, PA is ostensibly refusing to allow the transaction to be "reversed" in any manner.

Participant, very reasonably, doesn't give a hoot how it is fixed, just wants her money.

Any bright ideas? It isn't really an "ineligible" rollover distribution, so it's hard to use that line of argument. If you were a PA, what line of argument/documentation would induce you to send the $5,000 back to the Trustee?

[BG5150]

Tell the receiving institution that the full $20,000 was not the eligible amount of the rollover. Explicit participant instructions were for it to be only $15,000.

Taking the money out of the plan would not be a distribution, but a return of funds. Whomever processed the original distribution incorrectly should be on the hook for any losses or processing costs of the correction.

just my $0.02

[david rigby]

Tell the receiving institution that the full $20,000 was not the eligible amount of the rollover. Explicit participant instructions were for it to be only $15,000.

It may be reasonable to assume the receiving plan wants absolute documentation of the participant's initial election. Provide it.

That said, it may be that a cleaner method of resolution is to reverse the entire transaction, with proper documentation, and start over. If it were me, I would advise my ERISA attorney which course of action I had selected.

[Belgarath]

Thank you both. The initial response was provided 3rd hand, so we've requested the employer to authorize the new PA to speak directly with us. I anticipate that something reasonable can be worked out! We assume they will want copies of all the documentation - we certainly would, if the situation were reversed.

[Trekker]

How was this eventually resolved? We have the exact same situation.

Thanks.

[Belgarath]

They sent the money back, so everyone ended up reasonably happy.