RMD amounts for IRA included in rollover to 403(b)

Participant turned 70 1/2 in 2019.

Participant rolled over his Traditional IRA to his Employer's 403(b)(9) in April 2019.

The IRA custodian did not remove the participant's 2019 RMD amount prior to the rollover to the 403(b).

The participant is requesting his IRA RMD from the 403(b) because "Edward Jones said he could do it that way". (sigh)

He has no other IRAs to aggregate and pull the 2019 IRA RMD.

I realize that an IRA RMD cannot be taken from a 403(b) but I am curious, what is the next step here?

TIA for you comments.

The correct step is to return the RMD to the IRA because it wasn't eligible for rollover and have him take the RMD from the IRA before 12/31/19.

Whether or not the participant and Edward Jones will actually do that is a separate matter.

Thanks for your reply, Lou S. I agree, this presents some challenges since cooperation by both the participant and EJ is necessary. If the parties do not work with the 403(b) on this, is there any risk to the 403(b) by keeping those funds in the Plan/the Member account? Does the 403(b) need to take any specific action?

The 403(b) has accepted money not eligible for rollover and needs to disgorge those funds.

What it really comes down to is form over substance as if the 403(b) pays the participant a taxable distribution equal to RMD she is in the same position as if she took the RMD from her IRA. Unfortunately the IRS doesn't really see it that way for some reason.

15 hours ago, Lou S. said:

The 403(b) has accepted money not eligible for rollover and needs to disgorge those funds.

What it really comes down to is form over substance as if the 403(b) pays the participant a taxable distribution equal to RMD she is in the same position as if she took the RMD from her IRA. Unfortunately the IRS doesn't really see it that way for some reason.

Agreed, but you should all recognize that the money does not have to go back to EJ.  It could be transferred back to an IRA at, say, his local bank that he just sets up.

That's a good idea, Larry Starr! I did not even think about that. Thank you for your insight.

So....Edward Jones has not provided the 2019 IRA RMD amount they erroneously included in the rollover to the 403(b). It was requested that EJ send the 403(b) a letter that states the amount that was not eligible for rollover (the 2019 IRA RMD amount). They have refused to do so. The 403(b) plan, not knowing what portion of the rollover was ineligible is going to send the full amount of the rollover (plus earnings) back to the IRA. The participant is not required to receive an RMD from the 403(b) due to the still working exception. Does the 403(b) code this transaction of sending all the funds back to EJ as a rollover? I am wondering what code would be used on the 1099-R.

15 hours ago, KaJay said:

The 403(b) plan, not knowing what portion of the rollover was ineligible is going to send the full amount of the rollover (plus earnings) back to the IRA.

What?  Is that what someone requested?  

As you note, what is the code on the 1099-R going to be?  I think the best answer is to stop this transaction if possible, then, as suggested, send just the RMD amount back to the/an IRA (coded as a rollover) and then withdraw it as a taxable distribution.  

Unlike a retirement plan, IRAs don't have to satisfy RMDs individually, so I think that EJ is correct in not treating the amount rolled over as ineligible and is correct to not get further involved.  (Of course this doesn't absolve the broker from giving bad advice but EJ, as custodian, has done nothing wrong - as I see it.)

Thanks for your input, Bird!