I have a situation where an HCE ( Age 51) completed a distribution form and took a distribution from the company's MPP and did a direct rollover to the same company's PSP. The participant had not met a distributable event under the MPP and the form was never signed by a plan trustee, however the financial institution still processed the distribution and a Form 1099-R was issued for 2001.

The company has since changed financial institutions and all of the plan assets are with a new carrier. I am trying to think of the simplist way to correct the defect in an acceptable manner. We are getting ready to merge the MPP into the PSP.

A couple of thoughts in correcting the issue would be to issue a corrected 2001 Form 1099-R showing the amount as zero and then transferring the money back to the MPP to restore the account and then do the merger. Because the MPP is going to be merged into the PSP anyway, the other thought I have would be to do a retroactive amendment to the MPP to amend the NRA to age 50, thereby creating a distributable event under the MPP, but I'm not sure that would be acceptable. I have been reviewing the Employee Plans Compliance Resolution System but nothing seems to address this exact situation. Any thoughts would be helpful.

Thanks,

Brian

You could back out the rollover on the grounds that the employee never had the right to the money under the claim of right doctrine (because there was no approval from the pa) and issue a revised 1099. O r u could treat the transfer as a trustee to trustee transfer (providing that there is a provision in the plan) and issue a revised 1009 r. Also the MPP money would be subject to restrictions on retirement plans, e.g., no inservice transfer until retirement age and and annuity as normal form. The change of NRA is the last option to consider because it is an area subject to IRS discretion.