Invaild rollover contribution and subsequent distribution

[buckaroo]

One of my plan sponsor's has informed me that they accepted an invalid rollover of funds. We have informed them that, based on IRS Notice 2014-9,the funds need to be refunded to the participant (with any applicalbe earngings). The question that is now coming up is what code should be used on the Form 1099R. The Notice does not detail what code should be used.

1) Does anyone know what code should be used on the Form 1099R?

2) Since it is an invlaid rollover, my assumption would be that 10% should be withheld. Does anyone agree?

Any help would be greatly appreciated.

[BG5150]

I think that the withholding is optional to the taxpayer.

[ESOP Guy]

I am not convinced this needs a 1099-R. I relieve large banks and platforms pretty much always produce one but that is their policy no the law.

If this rollover is returned to where it came from why does it need a 1099-R at all?

[BG5150]

ESPO Guy: the publication cited above says:

Second, if the
plan administrator for the receiving plan later determines that the contribution was an
invalid rollover contribution, the plan administrator must distribute the amount of the
invalid rollover contribution, plus any earnings attributable thereto, to the employee
within a reasonable time after such determination.

So, if it is distributed, a 1099 should be generated.

BTW, the original cite is slightly incorrect. It is Rev. Rul. 2014-9, not Notice 2014-9. The latter references refunds of Zone Bonds or some such rigamarole.