Update – Company is still demanding return of pension buyout rolled over into IRA. Since last posting 8/2016 Lost Claim/Appeal. Funds still in IRA – important to mention to everyone who posted valuable comments (See-Lump Sum pension buyout-co wants funds returned) that these funds were added to an already existing IRA that I have had for many years. It had been suggested that I do NOT take my RMD until the situation is resolved. Unfortunately, I ran our of time for a response from Co during the appeal process and took a distribution in 2016 because I was 70 1/2 and required to do by IRS. I reported the distribution on 8606 for tax year 2016 return.
the RMD was based on the total balance in IRA account not just the rollover in dispute. BTW, as previously mentioned by others in this forum I still have the 1099R which has not been changed. In my appeal, I quoted the procedure code from the IRS which was provided here on the forum. Based on that procedure, it is my understanding that the Co. is required to correct any pension errors and notify the IRS and DOL of mistakes that occur in the plan. This has not been done. There are other avenues for corrections to the plan namely the responsible parties not the liability of the individual that received the pension distribution. As well as liability insurance that these pension plans are required to by DOL/ERISA. Namely, liability insurance.
It is my understanding that if the funds are removed from the IRA it is a tax event and the full amount becomes taxable. The IRS has no way of knowing that it was alleged a plan error. Therefore I cannot explain away a corporate error nor do I have the ability as a private individual to correct a pension plan. The IRS procedure
is obviously not a ruling just a procedure.
It is my understanding that once pension monies are removed from a plan they cannot be restored by sending
funds back to a pension plan…..please confirm….It is also my belief once pension funds are distributed they are no longer under the auspice of ERISA. It has been demanded that the funds are returned together with an additional $5,000 interest penalty. The Co. has stated that ERISA does NOT permit or are they required to indemnify me of any and all tax consequences. Namely, that are not allowed or required to rectify or take responsibility for the huge tax conseq. of this error. While the IRA funds are in a financial institution, I’m concerned of a civil fortfeiture or constructive trust placement on the entire amt while further attempts are made to resolve issue. 1099R reflects a distribution to a qualified retirement acct. Are IRA accts protected somewhat?
Who is liable for the tax consequences and am I liable for the tax consequences due to a corporate error.