Underpayment question

[fiona1]

Plan participant terminated and retired at age 68. They took a full cash distribution and elected to have it rolled over to an IRA.

3 years later it was determined that an incorrect present value rate was used to calculate the single sum value. The participant is owed an additional $6,000 plus interest - in which the plan sponsor will be using IRS self correction program guidelines to distribute this corrective distribution.

Considering that the participant is now 71, is there anything that would preclude them from rolling over this amount?

[jpod]

How can he rollover the MRD piece?  If you're wondering whether this part of his accrued benefit could escape the MRD requirement because it "should have" been distributed when he was 68, I doubt you will find any legal support for that.  Aside from what he can or cannot do, the Plan's has a qualification problem due to the failure to distribute at least one MRD.  

[Calavera]

Participant who is 71 now may or may not miss his RMD yet. Be sure you are eligible for a self correction (i.e. failure is insignificant). You cannot roll over whole amount.

[fiona1]

I think the thought process is that this really isn't an MRD piece. The full benefit was paid out at age 68, albeit with an incorrect actuarial equivalent rate. By using the incorrect rate, it resulted in an underpayment. Unfortunately it wasn't discovered until 3 years later. The EPCRS says that correction is determined by taking into account the terms of the plan at the time of the failure.

[Mike Preston]

So many semantic nuances.... so little time. JPOD wasn't saying that the entire $6,000 is "an MRD piece".  He was saying that of the $6,000 (which constitutes a payment of the balance of his benefit) a "piece" of that $6,000 should be considered an MRD and that piece should not be rolled.

Your EPCRS argument might win the day, but it hardly seems worthwhile to do anything other than follow JPOD's lead since the MRD "piece" will be but a few hundred dollars.  Why risk the plan's qualified status?  It certainly doesn't make sense to file under EPCRS, IMNSHO.

[Lou S.]

Think of it this way, if the $6K had been paid out correctly, his IRA would have been higher and he would have had a RMD that was slightly higher due to the extra $6K being in his account.

But since the Plan is paying it now, the Plan has to satisfy the RMD independently of the IRA.

And as I think jpod is noting you may have multiple RMDs to calculate depending on his first 70 1/2 year.