Duplicate Distributions Processed/Lump Sum and Rollover for same amount

[whitboston]

Participant originally requested a lump sum distribution.  Asked his Employer if he can change his mind.  The original paperwork had not been processed so TPA told the Employer to have  the participant to complete new distribution paperwork.  The original request was never cancelled by TPA and in Nov 2018 a distribution check is issued to a participant as a lump sum distribution.  Taxes withheld and participant cashes check.

The "new" distribution paperwork is received and in Dec 2018 another (duplicate) check is issued to the participant as a rollover and sent to rollover institution.  No taxes withheld and check is cashed.

Lots of issues on this one, but if we want to correct it as if the lump sum distribution did not occur, how can we fix it?  A corrected 1099-r has to be issued, but how do we get the taxes back from the Government?

 

[Pam Shoup]

The trust company should have a mechanism for crediting back the taxes. Check with them.  The participant will have to pay the money back to the plan to make it whole.

However, i would argue that since the participant cashed the first check, that the second one was issued in error and the rollover company should have to return the money.

Either way, procedures and controls should be reviewed by the Plan Administrator to make sure that they don't approve two distributons for the same person.

 

[Earl]

The 945 should show an excess tax payment that can be refunded or credited to the next period.