Duplication of RMD payments

Our client, a doctor with a one-person cash balance and profit sharing plan, took his RMDs for 2021 in January/February 2021.  He obviously forgot, and took duplicate payments in October 2021.  We are proposing correction differently for the two plans:

1.  There is no provision under the pension plan that allows an ad hoc in-service distribution.  Although distribution can commence after NRD while in-service, the form of payment would have been either an annuity or a lump sum of his entire vested accrued benefit.  Pursuant to EPCRS, we are planning on treating this as an overpayment (i.e., a payment not authorized by the plan) and having him repay the distribution.

2.   The profit sharing plan does allow for in-service distributions, so I can't think of any way this can be treated similarly (even though the participant did not complete any election form or waive withholding).  We are planning on correcting this via a 60-day rollover back to the plan (for which repayment is now extended until 2/15/22 due to Hurricane Ida).  Is there any other way to handle this?

How do we prepare the Forms 1099-R for 2021?  The initial RMDs will be reported properly for both plans.  Does the pension plan report the second distribution as a normal distribution, or not?  If yes, how does the participant reflect the repayment to the plan in 2022?  With respect to the profit sharing plan, I assume the second distribution is reported as a normal distribution and then the participant reflects the rollover on his Form 1040 for 2021 even though it was completed in 2022.  How is this ever reconciled with the IRS if they only receive the 1099 but no 5498 (that an IRA trustee would file)?

Any other suggestions on how to resolve?

Thanks.

On 1/14/2022 at 3:56 PM, cathyw said:

Does the pension plan report the second distribution as a normal distribution, or not?  If yes, how does the participant reflect the repayment to the plan in 2022?  With respect to the profit sharing plan, I assume the second distribution is reported as a normal distribution and then the participant reflects the rollover on his Form 1040 for 2021 even though it was completed in 2022.  How is this ever reconciled with the IRS if they only receive the 1099 but no 5498 (that an IRA trustee would file)?

I'm pretty sure the PS distribution is simply reported as it was and the participant reports it as non-taxable on his return.  I don't think you worry about the 5498 although be prepared to show backup of the money coming in when the IRS asks about it a couple of years later.

Sorry I don't know about the pension reporting as you laid it out but would have been inclined to do a retro amendment to allow it and then handle it the same way; isn't that easier?  

Re the DB distribution, see Rev. Rul. 2002-84. The repayor of the mistaken payment is generally entitled to a deduction in the year of the repayment using the special rules of Section 1341, provided the amount exceeds $3,000. For amounts < $3,000, you're supposed to get a miscellaneous itemized deduction subject to the 2% floor, but the TCJA of 2017 of course suspended miscellaneous itemized deductions through the end of 2025.

Interesting....I think Bird's suggestion of amending the pension plan retroactively under EPCRS to allow the second distribution, and then invoking the 60-day rollover is a better way to go.

Thanks to all.