401k to 401k transfer
Previous 401k custodian was asked in early 2023 to transfer 401k balance to new employer’s 401k custodian. Client properly completed the previous custodian’s transfer request form naming new custodian as the payee. Previous custodian mailed the check, payable to new custodian, to participants address of record. Participant never received the check and check was never cashed. Participant forgot about the transfer request and did not follow-up with previous custodian. Participant receives 1099-R in 2024 showing where previous custodian made a taxable distribution in 2023 withholding 20% for federal taxes and then escheating the remaining balance to the State of Texas. Any ideas how to undo the taxable distribution?
Permalink Submitted by Alan - IRA critic on Wed, 2024-04-03 19:13
A total mess involving a botched direct rollover, an incorrect 1099R, and a participant who apparently does not check their mail or notifies parties of address changes. Plans only escheat funds after attempting to contact the participant. Did participant ignore notifications from the plan regarding escheatment? If there was a direct rollover check and also an escheatment, there should be a 1099R for each. Participant needs to contact the plan and determine what transactions were made, the amounts of each, the date of each, and see if that info matches up with the 1099R received. I assume that the new plan never received any direct rollover.