Correcting Ineligible Rollover Received

[Guest Ann]

A Money Purchase Plan with individual directed accounts received an inelligible "deposit" into a participant's account. His Brokerage firm deposited a 403b earnings distribution into his MPP Plan account instead of his regular account with the same brokerage. Additionally, the MPP has been terminated and assets are being rolled out this year. How can this be corrected?

[Guest Anne]

The brokerage firm should correct the error (presuming it was a bookkeeping mistake and not a directed investment). What are the rest of the details?

[Guest Anne]

The brokerage firm should correct the error (presuming it was a bookkeeping mistake and not a directed investment). What are the rest of the details?

[Guest Ann]

The brokerage firm wants to remove the original number of shares of the mutual fund that was purchased with the money erroneously deposited. But there have been dividends and gains paid and reinvested in the mutual fund since the original purchase. They faxed to me a copy of the check from the annuity which was payable to the brokerage c/o the participant's name. I gather that this was an earnings distribution taken by the individual and was intended to be placed in his personal account at the same brokerage. (I have requested additional information on the deposit) They also faxed a formatted letter of instruction for the Plan Trustee to sign to transfer the original number of shares into the participant's personal account. Can the earnings on the initial investment be computed, then the total amount be transferred to the individual's personal account without causing problems for the plan's qualification?

[Guest KarenW]

Yes be sure to add appropriate earnings to corrective distribution. Be sure to report as taxable distribution on 1099-R as your plan's trust is the payor of this correction.