Escheated 401K
Customer’s 401K from prior plan administrator was escheated to the state. Not sure why. Customer has been able to recover the 401K funds. State mailed 401K funds to customer. Wants to open IRA. Customer has constructive receipt of the funds (made payable to him from state). Any reason we cannot code this as an indirect rollover and put into IRA?
Permalink Submitted by Alan - IRA critic on Sat, 2013-08-24 21:49
There are on going efforts to develop proper intermediaries including the PBGC to accept these plans on behalf of employers. Meanwhile if the employer sends the plan balance to the state unclaimed property Dept, it should not prevent the participant from rolling claimed assets over to an IRA. Customer should retain all documentation from the plan itself as well as from the state to document the source of these funds. There may well be no 1099R issued and any withholding will have to be replaced to complete an IRA rollover. Participant should also document the date the funds were received and rolled over and report this on Form 1040 as if a 1099R were issued. Since the IRS will not have a 1099R in some of these cases, this documentation may have to be presented to validate the rollover.