Fidelity makes an offer for their RMD mistake on inherited IRA
2005,2006,2007,2008,2010 Fidelity made RDM distributions on my inherited IRA account based on my mother’s birthdate rather than mine. This resulted in excessive distributions and loss of compounded growth in the IRA for about 30 years. My CPA calculated my losses (based on Fidelity’s figures)
excessive taxes $29,222
Loss of anticipated Financial Aid 14,392
Loss on L/T Earning potential growth 114,503
taxes on settlement 24,000
Total Loss & Fees incurred 182,117
After 1 1/2 years, Fidelity has offered me a settlement figure of $88,000 and no requirement to sign a release so that I can still file a complaint with FINRA. How would accepting the money affect a claim with FINRA for the balance of the money I feel that Fidelity owes me? What would you do?
Permalink Submitted by Bruce Steiner on Sun, 2013-03-03 04:25
It’s hard to evaluate this without knowing all of the facts. Was Fidelity responsible for calculating the required distributions, or was the beneficiary of the inherited IRA responsible for calculating the required distributions? Why wasn’t the error spotted after the first year’s distribution? What assumptions were made in the calculations? What do you mean by “excessive taxes? Has the total loss been discounted to present value? At what interest rate? Has the Section 691(c) deduction for the estate tax been taken into account?
Permalink Submitted by Jose Morales on Mon, 2013-03-04 17:20
It is very unusual for an IRA Custodian to take on the burden of calculating a mandatory distribution for a beneficiary. It really will come down to the facts and circumstances of this incident, as bsteiner noted.To start, as far as the IRS is concerned the responsibility for calculating a beneficiary’s mandatory distribution is the sole responsibility of the beneficiary themselves. There is no regulation compelling an IRA Custodian to perform this calculation for a beneficiary and there are many circumstances in which an IRA Custodian simply has no way of doing this even if they wanted. That is why, as I originally stated, it is very unusual for an IRA Custodian to voluntarily take on this task and liability.To really understand how this happened we would have to go all the way back to when, or if, an inherited IRA was established. Then what instructions or requests were made and the documentation for these.