A participant in a 401(k) plan terminated employment and filled out distribution forms. The employer accidentally paid the terminated participant from the corporate checking account rather than the trust. The former participant still has an account balance at the investment company, and has also been paid the equivalent of her account balance from the checking account.
No 1099-R or 945 was filed because as far as the investment company was concerned, no money left the plan in that year (2007).
What is the proper way to proceed to correct this error?
Thanks!
Full Version: Distribution from corporate checking account
What a Pain!. You have my sympathies. A few questions first:
Approximately how much money was the original pay out?
How much is the account worth now?
Were distribution forms filled out prior to the payout in 2007?
What are the chances of getting the 2007 payout back, now? ( for example is it a family member of the owner)
Approximately how much money was the original pay out?
How much is the account worth now?
Were distribution forms filled out prior to the payout in 2007?
What are the chances of getting the 2007 payout back, now? ( for example is it a family member of the owner)
QUOTE (Jim Chad @ Dec 16 2008, 06:22 AM) 
What a Pain!. You have my sympathies. A few questions first:
Approximately how much money was the original pay out?
How much is the account worth now?
Were distribution forms filled out prior to the payout in 2007?
What are the chances of getting the 2007 payout back, now? ( for example is it a family member of the owner)
Approximately how much money was the original pay out?
How much is the account worth now?
Were distribution forms filled out prior to the payout in 2007?
What are the chances of getting the 2007 payout back, now? ( for example is it a family member of the owner)
The total cash payout to the participant was $427.36, and they withheld taxes of $106.84 . She filled out the distibution forms prior to the distribution, and i think the employer just cut her a check because "she needed the money right away". She is not a family member or anything, so i think tracking her down and getting the money back would not be easy, but possibly worth a try.
Her account is now worth $340.
Just my opinion: assuming the TPA is not a party to the plan in any way, or the trustee, don't do it.
Make sure you have clear audit trail of every payment, every direction.
Make sure you have clear audit trail of every payment, every direction.
QUOTE (david rigby @ Dec 16 2008, 09:27 AM)
Just my opinion: assuming the TPA is not a party to the plan in any way, or the trustee, don't do it.
Make sure you have clear audit trail of every payment, every direction.
Make sure you have clear audit trail of every payment, every direction.
What do you mean by "don't do it"? Don't correct it?
TPA is not a party or trustee.
I'm not sure if this applies to the OP, but on page 9-21 of the ASPPA Defined Contribution Plan Series Volume 3 (for DC - 3) for 2008, in the explanation of an interest free loan to the plan, an employer could pay a benefit obligation. There are restrictions which could make this invailid for the original post, but... I note that this discussion on PTE is for payment of expenses that are incidental to the plan's operation. Anyway, just a thought. 
QUOTE (persie @ Dec 16 2008, 12:40 PM)
What do you mean by "don't do it"? Don't correct it? TPA is not a party or trustee.
Never mind. I posted an answer to the wrong question.
Oops.
Was a tax form issued by the company for the check?
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