Roth 401K funds erroneously rolled over to a traditional IRA
A client rolled over his $2million 401K, which had $150,000 of Roth 401K value, all to a traditional IRA two years ago. The client is not 70 1/2, and there have been no distributions from the traditional IRA. Is anyone aware if this can be corrected, and the Roth funds plus earnings while in the traditional IRA, deposited into a Roth IRA account?
Permalink Submitted by Alan - IRA critic on Tue, 2019-05-28 15:49
The two year delay makes this very tough to correct since all tax reporting has been done by the custodian. Who is responsible for this error, the client, the 401k administrator, or the IRA custodian, or perhaps some combination thereof? If client can establish 0 blame with 100% of error made by ONE of the other parties, there might be a chance to have the 150k reformed. Meanwhile, because a Roth 401k is not eligible for rollover to a TIRA, client also has a reportable distribution and an excess regular contribution to the TIRA that has produced at least one year of 6% excise taxes. What does the 1099R form show, is there a separate form for the 150k coded H? If so, did the IRS catch this error?