participant received his distribution from a 457 plan and rolled the balance into an IRA. We now discovered this problem, what are our options? what do we do with the money?

Was this a "direct rollover distribution", trustee-to-trustee? Or did you guys cut a check payable to the participant?

[This message has been edited by jlf (edited 08-04-99).]

[This message has been edited by jlf (edited 08-04-99).]

I now recognize that the money has been received by the IRA custodian. See if the 457 plan will accept a return check.
Hopefully they will and the transaction will be reversed. Do this ASAP. Any gain accrued while in the IRA will be taxable and probably subject to the 10% penalty.

It seems to me that both trustees, the 457 Plan Administrator and the IRA Custodian, were out to lunch on this one. Your compliance procedures should be reviewed forthwith.

Let's hope that the IRS does not view this transaction as a TAXABLE DISTRIBUTION.

[This message has been edited by jlf (edited 08-04-99).]