In-Service Distribution Prior to Age 59-1/2

[TPA Bob]

A 401(k) Plan has an in-service distribution option at 59-1/2. HCE receives an in-service distribution during 2010 and is only age 57. Sources distributed are 401(k), Safe Harbor QNEC, and Profit Sharing (non elective contribution). The distribution was rolled over to an IRA and then converted to a Roth.

Any thoughts on how this can be corrected? I have looked at Rev Proc 2008-50 and do not see this situation.

Many thanks in advance for thoughts.

[ETA Consulting LLC]

VCP.

I would not dream of trying to get out of this without a compliance letter from the IRS. We made an oversight, we will reach back out to the HCE and retrieve the funds that were improperly distributed. If the HCE doesn't concur, we will issue a revised 1099R showing those amounts ineligible for rollover based "solely" on the notion they were distributed outside of the written terms of the plan...... The beautiful thing about this approach is that you may disagree with 10 or 20 other people here on the best approach, but it's a moot point because you're working directly with the IRS (after they finally assign the case in a year or so)

Remember the three umpires:

Umpire 1 - I call it as I see it.

Umpire 2 - I call it as it is.

Umpire 3 (The IRS) - It's nothing until I call it.

Good Luck!

[TPA Bob]

VCP.

I would not dream of trying to get out of this without a compliance letter from the IRS. We made an oversight, we will reach back out to the HCE and retrieve the funds that were improperly distributed. If the HCE doesn't concur, we will issue a revised 1099R showing those amounts ineligible for rollover based "solely" on the notion they were distributed outside of the written terms of the plan...... The beautiful thing about this approach is that you may disagree with 10 or 20 other people here on the best approach, but it's a moot point because you're working directly with the IRS (after they finally assign the case in a year or so)

Remember the three umpires:

Umpire 1 - I call it as I see it.

Umpire 2 - I call it as it is.

Umpire 3 (The IRS) - It's nothing until I call it.

Good Luck!

Thanks for the input.