When a rollover isn't a rollover

[shERPA]

Participant rolled into his employer's plan several years ago. In 2013 he requested a distribution of his rollover, and it was paid out - he did not do a direct rollover.

Now that he's received the 1099-R with a taxable amount showing, he is telling us that the funds originally rolled into the plan were not from another plan, just his own personal funds that were already taxed, just because he wanted everything "in one place". He wants the 1099-R revised to reflect the same.

If he is correct - and that's not certain - then it should have never rolled into the plan in the first place. But how is my client the plan sponsor supposed to know this if was originally represented as such? And what sort of documentation should the sponsor require before considering amending the 1099-R - if he should even consider this at all? Any other correction the sponsor should consider? It is out of the plan now so if it was an invalid rollover at least it is now corrected.

Thanks.

[masteff]

Not sure if EPCRS says anything but see 1.401(a)(31)-1 Q&A-14. (Hopefully I'm not the only one who still recalls when that particular item was change in 1999 http://www.irs.gov/pub/irs-regs/24556296.pdf Of course it directly impacted me as I was waist deep in learning plan admin at the time.)

I personally would want to search any and all records to see what type of assertions or certifications the participant provided when making the roll-in.

The "hard nosed" position is likely to tell the participant he has to sort it out on Form 5329.

[QDROphile]

A certain amount of diligence is required before accepting a rollover to avoid disqualifying the plan. It is not much. Check the regulation cited above for examples.

[K2retire]

Did the record keeper require a form along with the funds? If so, it is likely to include language certifying that the funds are from a source that are eligible to be rolled into the plan. A participant signature on that form should end the issue.