Rollover?

[Dougsbpc]

A plan participant is 82 years old and recently retired. She has been very sharp as the office controller for many years. She elected to take her entire $500k distribution as a lump sum.

We followed up with a phone call to ask her if she had really thought this through. She replied that she did and wanted to take the lump sum rather than doing a direct rollover. She seemed to be of sound mind when speaking with her.

So we processed the distribution as a lump sum just like the benefit elections indicated.

Today (30 days after the actual distribution took place) her financial advisor called and mentioned that she is not well and should have rolled over the entire amount.

She has another 30 days to roll over the entire amount (including the taxes withheld) to keep it all tax deferred. However, it appears she does not have the liquid assets to do this. She does have non-liquid assets (Real Estate etc).

I don't think there is any way around coming up with the withheld taxes in the remaining 30 days.

Any ideas?

Thanks.

[Lou S.]

Not to be callous but this is really not your problem.

Couple of ideas -

Borrow the funds against the real estate assets? Pay back with next year's tax refund.

Rollover what she can, pay taxes on what she can't.

Have them request a private letter ruling from IRS.

[QDROphile]

It is not a question of callous. A plan administrator or its agent in no way should be discussing any personal matters or solutions with a participant. Only matters relating to the plan are appropriate. An appropriate proposition is whether or not the plan will reverse the distribution and distribute as a direct rollover. I do not recommend that; the proposition is only an illustration of a plan matter as opposed to a personal matter such as choosing to roll over some portion of the amount if 100 percent is not feasible because of limits on avaialbe cash.

[GMK]

Agreed that this is not the plan's concern. Apart from the plan, individuals may be concerned about their co-worker friends and try to help them.

It's not clear if Ms. Controller is now asking for advice about a 60 day rollover, but if she is, Lou S.'s ideas are a good start.

Not to be callous but where was the financial advisor with his medical advice before the distribution to his 82 year old client? I don't know if he would have received a commission if there was a rollover, so I won't speculate on that.

[david rigby]

Agree with QDROphile: if the PA is satisfied that the plan did nothing wrong, then the plan should stay out of it.

BTW, the FA does not already understand the points raised by Lou S? Uh oh.

[jpod]

If she retired in 2014, wouldn't part of the $500k she received in January 2015 be an RMD anyway? IF so, how much is an MRD as compared to the $100K withheld for taxes?

[BG5150]

RMD on 500,000 at 82 is about $30,000

[My 2 cents]

It is not a question of callous. A plan administrator or its agent in no way should be discussing any personal matters or solutions with a participant. Only matters relating to the plan are appropriate. An appropriate proposition is whether or not the plan will reverse the distribution and distribute as a direct rollover. I do not recommend that; the proposition is only an illustration of a plan matter as opposed to a personal matter such as choosing to roll over some portion of the amount if 100 percent is not feasible because of limits on avaialbe cash.

Not an expert on these matters, but for the plan to reverse the distribution, wouldn't the participant have to return 100% of the distribution to the plan (including the amount withheld for taxes)? If she could do that, she could get out of the situation cleanly by rolling that amount over to an IRA. Or am I missing something here?

[jpod]

If she retired in 2014 and received payment in 2015, wouldn't 2 RMDs have to be held back? If so, let's say that's $60K, which means she only has to come up with $40K to do a complete rollover.