Incorrect payout

[PFranckowiak]

Participant terminated, but was rehired.  He received his distribution after he was rehired as the client didn't realize he shouldn't get paid.  He got paid in two parts.  A rollover and a cash distribution.

The exact dollar amount was returned from the plan he rolled into.  (not any earnings).  Not sure how they are handling it as far as 1099R. 

He got paid cash (Roth)- he paid 100% of the cash back, including the withholding on the earnings.

So I think we still have to do 1099R for him, so that he can get his withholding back.  But should we adjust that to show the distribution just being the withholding as the money is back into the plan?    Also show as nontaxable distribution?

 

Thanks

 

 

[ESOP Guy]

Why isn't the plan's job to get the withholding back?

Depending on how the withholding was done it is possible to make a smaller deposit on a later need and make all the forms reconcile.  In other cases you might have to get a refund.  But so far it looks like the participant did their part for the correction. 

I wouldn't have made the participant pay back the withholding in case that isn't obvious.