Nontaxable funds mistakenly put into IRA by broker when client has qu

[Guest MGDLAW]

Brokerage house accepts trustee to trustee transfer of retiree/client's 401(k)for rollover into IRA. A nontaxable sum is also paid out to retiree and sent to brokerage house for investment. Brokerage house, however, mistakenly adds nontaxable funds to rollover amount and places all funds into the IRA. Three years later brokerage house learns of its mistake. What is best course of action for retiree/client/taxpayor to have this mistake by brokerage house corrected? What are the penalties to the retiree?