lump sum pension buyout – Co. wants funds returned rolled into IRA

Submitted by Diane Connolly on Mon, 2016-07-25 20:14

Since 2005 been receiving pension benefit as result of divorce. (QDRO) In June 2015 offered & accepted Lump Sum pension buyout-received numerous qualification notifications. In Nov. 2015 funds dispersed and rolled over into IRA
which was one of the options. Also was required to sign off on any and all future pension benefits as well as beneficiary benefits. Co. claims administrative error. I was calculated and placed into program for buyout prior to June 1, 2015. On June 29th 2015 plan placed an Amendment which created a disqualification for myself. If I remove the funds from the IRA I will incur taxes (Federal & State & Excise taxes totaling over $75,000+. This was a plan error and I should not be responsible for any taxes. They actually requested a personal check or almost 300 money orders totaling the amount which is $146,000.00. While they have not attempted to sue me in Federal court, I was hoping anyone on this forum could shed any light at the end of this dark tunnel and make any suggestions to me.
Also I have signed off on any future pension payments and understand from ERISA that because it was a lmup sum distribution I’m not covered under ERISA law for protection of the pension payments. But the tax liability is staggering……



Submitted by Alan - IRA critic on Tue, 2016-07-26 02:12

This is not only a highly complex issue, but one that included large changes in 2015. I would not rush into anything, and you may want to consider retaining a qualified benefits attorney due to the potential large amount of dollars lost and various excess IRA contribution issues. Read this, and note the link to the 2015 revenue ruling that changed the options the plan is allowed to use, as well as a potential effective date back to March, 2015.  http://www.pensionrights.org/publications/fact-sheet/what-recoupment



Submitted by Diane Connolly on Thu, 2016-07-28 23:26

Does anyone have any knowledge is the Company can rely on any ERISA laws to claim repayment.  When company distributed it was rolled over into IRA by them as a qualified rollover.  Because I was receiving benefits as a result of a QDRO – is the QDRO still in effect now that I’ve been basically been bought out of the pension plan?  I understand that if after I file the available Claim/Appeal procedures and lose, I’ve already lost the initial Claim because company claims I did not qualify for the buyout but was approved due to a recordkeeping error.  I also signed off on any and all future pension benefits when I took the buyout.  Company bought out in April 2016 from Alcatel-Lucent to Nokia. plan stayed with original company who still maintains the pension.  Yes, Alan, this is so complex I cannot ge anyone to assist…..anyone have any thoughts…..I believe if I lose the final Appeal phase I’m going to be subject to sued in Federal Court.  I read the ruling from IRS and realize that this was alleged company error made by the outsource company – I know these companies have insurance to cover these mistakes, but sure if ERISA makes the go after the retiree.  



Submitted by Alan - IRA critic on Fri, 2016-07-29 00:21

Am not clear on the exact reason for the recovery effort. Is it based on your being an alternate payee under a QDRO, or would it not have been an issue for the actual plan participant? Did your ex separate from this employer or was there some other reason for the buyout offer?



Submitted by Ben Meyer on Fri, 2016-07-29 05:00

If there was an actual administrative error and the funds must be restored to the original plan, would it be possible to roll back the funds as a direct rollover to the original qualified plan?  If that is permitted, the original plan would be restored in a taxfree and penalty-free event.  Nullification of the waiver of future pension benefits should also be granted considering that it was requested due to company error.  Perhaps an advocate can negotiate for a resolution along those lines.

Another question for the company is how many others were also given buyouts in error?



Submitted by Diane Connolly on Sat, 2016-07-30 02:01

This was a buyout offered to retirees and their beneficiary, and alternate payees.  I am the alternate payee have shared QDRO. was accepted in the program then amendment several weeks later went into effective making anyone with a shared QDRO not qualifying.  Even after the amendment I continued to receive notification that I was accepted & approved. Co. issued check for buyout as a IRA rollover.  paperwork indicates qualified rollover.I understand I am the only person given this buyout in error because of this reason. The error was made by an outsourced company who was hired to handle the buyout. I understand that the enitity reasonable for error should be resp for placing the funds back into the plan. Also the Company has liability insurance for this type of mistake. Many tax attorneys have told me that the tax consequences this will create will be over $50,000 before penalities. ex husband was retired and he & I have been receiving the split pension amount for the past 10 years. I also understand that QDRO is null & void because of the lump sum separation buyout and another needs to be prepared along with a stipulation to the original divorce.  The company wants me to personally make the withdrawal in the form of payment being money orders!!! I think most people lose these appeals with these large companies.  Not only am I the only person this has happened there isn’t even case law and I am the only woman…..  



Submitted by Alan - IRA critic on Sun, 2016-07-31 00:17

  • I would reiterate that you should not rush into paying them back until the situation is much clearer. Was the lump sum paid to your ex also subject to repayment demand?  You mentioned “shared QDRO” so I wondered if this plan amendment also affected your ex. 
  • Attached is an article by Natalie Choate, a renowned expert on retirement plan issues. However, in the attached comments those made by Fred Farkash make sense and somewhat offset the combination of taxes and penalties presented in the article. At least, with a claim of right if you get a tax credit for the repayment your taxes would be offset on the distribution.  http://www.morningstar.com/advisor/t/88752054/plan-overpayment-disaster.htm?&ps=17
  • In requesting repayment, does the plan intend to reinstate the monthly annuity you were receiving before? Was that a life annuity? In other words, did you consider if the prior payments were reinstated, would you be better off or not?  If about a push, then you probably do not want to spend big bucks on an ERISA attorney to contest the plan’s demand. That said, you may still need to get help in understanding your choices.
  • Watch for a 1099R from the plan amending the one you might have received in January. They might revise it to show a different code in Box 7 from the G code you probably already have. Code E would change this from a direct rollover code to a taxable distribution and bring the IRS into this relatively soon. The plan might do this to ratchet up the leverage on you.
  • Of course, if they wanted to funds returned to them and did NOT offer to reinstate your old payments, then you would normally resist paying them back.
  • Do you have a copy of their plan. If you litigate, your attorney will need a complete copy. It would be interesting what provisions are stated with respect to QDROs.


Submitted by Diane Connolly on Mon, 2016-08-01 15:56

I was originally notified of the upcoming lump sum pension buyout back in April 2015. Together was provided a calculation of what my buyout would be which would indicate that I was considered eligible.  The notice said all persons eligible would receive further notices to follow.  So in June 2015 the notices started arriving.  Effective on June 29, 2015 the Pension Plan amended the plan to exclude individuals with shared interest QDROS as determined by Plan Administrator.  There is no date when this was adopted just the effective date which was after I was notified that I was accepted.  There was a bullet in the offering packet that the Plan Administrator reserves the right to amend the plan. I was thinking that because of the effective date I might have someleverage because it went into effect after I was accepted.  Also the Plan documents have no provision for overpayments of lump sums.



Submitted by Alan - IRA critic on Mon, 2016-08-01 16:12

So the plan is asking you to return the lump sum without even clarifying what happens to your benefit thereafter? Was the buyout to be required or was there an option to elect it?  If an option, what date did you notify the plan you were accepting it?  Was your ex’s benefit part of the shared QDRO such that he was also requested to return the lump sum?



Submitted by Ben Meyer on Mon, 2016-08-01 16:18

I concur with the earlier statement by Alan that this situation is highly complex and poses a large risk to you due to the high amounts involved.  You should seek the assistance of a qualified benefits or taxation attorney.  It doesn’t sound likely that you can resolve the matter correctly without expert help.  Resolution may require legal negotiation with the Plan and a PLR may be needed, either by you or the Plan



Submitted by Alan - IRA critic on Mon, 2016-08-01 16:51

Rev Procedure 2015-27 was released in early 2015 with an effective date of 7/1/2015. These procedures offered some relief to a plan’s overpayments under EPCRS. It is obviously no accident that this plan adopted an amendment effective 6/29/2015. While the amendment may be valid, it also may violate ERISA in some manner. Retaining both a tax professional to decipher the tax implications and an ERISA expert will be expensive since these people likely do not come packaged into a single person. Before incurring major expenses, you need to determine what the plan intends to do with any repayment you provide and what the present value of the payout of your remaining benefit will be compared to where you stand now. I would not take any distribution from your IRA until the plan provides clarity and you can analyze your options. On the other hand, you do need to keep working on resolving this so you can decide soon whether to retain the expensive professionals (particularly an ERISA attorney) you need or save the expense and return the funds. Then all you would need is a tax professional to assist with the tax treatment described earlier. That should not cost much compared to an ERISA attorney. Contacting the DOL is also worth considering by yourself or preferably your legal counsel..



Submitted by Diane Connolly on Mon, 2016-08-01 18:57

The ex-husband did not take the buyout offer. It was a window program approved just under the wire before the IRS issued the ruling not allowing lump sum buyouts to be offered in the future.  It was a one time offering based upon the IRS ruling, I’m sure.  The company was recently bought out by Nokia but the Pension Plan is still being managed by   the original company. What the biggest problem is the taxes because it was rolled over into the IRA if I and I say because I’m being told to withdraw the money it automatically will trigger a tax event, this is over $140,000.  The Amendment that I quoted effective 6/29/2015 made anyone with  a shared interest QDRO not eligible, but, this window program was in the works before the amendment and you have to ask yourself why wasn’t this caught and notices sent out to the individuals told they qualify when the program was implimented that you are no longer eligible then this situation would have never happened.  I know the Company was 100% responsible for the error – how could any court hold a person who in good faith accepted the buyout be responsible for tax penalities which could be as much as $75,000 to pay for someone else’s mistake. Yes, there is an Claim/Appeal process but that;s window dressing to be compliant with ERISA regulations.  I don’t believe any one is successful even when they are right.  But the company has liability insurance and the outsouce company that made the error should be responsible to make the plan whole again – not the retiree.  No wonder why the IRS stopped buyouts. This company sent threatening letters to the financial institution claiming a civil/criminal act had taken place.  Before any opportunity for a claim/appeal was even addressed.  



Submitted by Diane Connolly on Mon, 2016-08-01 20:28

I faxed over the signed documents in August which included waiving all rights to pension benefits the window to get paperwork in was September.  Then all lump sum payments were payout in November 2015.  I did make several telephone calls confirming that I was approved – I was told that some individuals were excluded but after being ut on hold many times, each individual came back and said – you qualify send the paperwork in as soon as possible.  I understand from speaking with someone associated with the retiree organization that I was the only affected by this non-eligibility decision.  which in itself is not good – I was also tld by this individual that the company will not committ to anything.  



Submitted by Diane Connolly on Tue, 2016-08-02 15:14

Alan -The link to the Morningstar article you referenced on your posting 7/30/2015  cannot be opened because I’m not a financial advisor.  Is there another way to view it as I’m sure it might provide additional information.  I’m going to have to start using some of this lump sum for living expenses and also because of my age I’m now required by the I.R.S. to take RMD this year!!!  I wonder what would happen after I take the distribution and have to pay taxes on my 2016 tax return…..



Submitted by Diane Connolly on Tue, 2016-08-02 15:19

CORRECTION -Alan -Your posting dated 7/30/2016  Morningstar article is there another way to have access to it as it doesn’t allow me to see because I’m not a registered financial advisor – help!!!!  This is a real nightmare……. 



Submitted by Alan - IRA critic on Tue, 2016-08-02 18:29

Google “plan overpayment disaster” and see if you can open any of the links provided there.



Submitted by Diane Connolly on Fri, 2016-08-05 03:46

Who is responsible for tax liability on excess monies rolledover into IRA?  This refers to my original posting – the company hired an outsource company that made this alleged mistake – which is under Appeal.  It is my understanding that the company is required to file some forms with IRS of what occurred and prepare whatever is necessary to avoid or take responsibility of the taxes due once the monies is removed from IRA.  I cannot imagine that the victim – the retiree has to bear the burden of fixing a company’s mistake.  How could the company even imagine that just take over $140,000 out of an IRA  buy a stack of money orders to total $140,000 (292) put them in an envelope and mail away and nothing would happen with regards to IRS….I must be missing something here or they think I’m a total fool….anybody familar with ERISA law here with regard to this situation…..thank you the posting about the IRS ruling.



Submitted by Alan - IRA critic on Fri, 2016-08-05 04:17

Yes, the money order request seems bizarre. In any event, for a plan overpayment the plan would typically re issue the direct rollover 1099R forms showing a distribution of the disallowed amount (100% in your case) rather than a direct rollover. They would probably code it E in Box 7 which eliminates the penalty, but that 1099R would still make the former rollover taxable. The code E also flags the distribution to the IRS that it was not eligible for rollover, so the IRS would then consider the rollover to an excess IRA contribution. However, Sec 408(d)(5)(B) provides some relief for the taxpayer if the IRA custodian can be made to understand WHY that rollover is an excess contribution – because the company made an error and provided incorrect rollover information in the first place. They should then return that rollover to you with any allocated earnings but only the earnings would be subject to tax and penalty, not the rollover itself. Finally, you could probably file a claim of right for having to return that money that would get you a tax credit to use against the original tax. So the end result would not be financially devastating, but would be a huge hassle to ferret out and report. The larger question as I see it is WHAT THEY PROPOSE to do with your money if you returned it. Are they going to reinstate the original payout schedule. They cannot just confiscate the money, and to date they are handling this very unprofessionally, so I would not rush to remove this money from the IRA anytime soon. You still are likely to need legal help IF you decide to contest the return and you would likely need an ERISA attorney for that. Now if your prior payout schedule before this happened was reinstated, would this be acceptable to you? In other words, if you are getting the same amount spread out over time, would it be worth spending big bucks on an ERISA attorney to preserve the lump sum distribution. For a moment forget taxes and think about the money itself – in which form would you rather have it?



Submitted by Ben Meyer on Fri, 2016-08-05 12:21

The request to send money orders for $140,000 is not only bizarre, it’s also irregular.  Withrawing the money would be a distribution.  An indirect rollover back into a qualified plan may not be allowed.  I can’t see any way that these funds would end up put back to provide the former pension using a cash transfer such as this.  The money orders would also be considered a cash transaction in excess of $10,000 and would trigger FinCEN reporting.  It looks like someone at the institution is inventing their own procedure to cover their tracks in making a mistake, or worse.  I suggest caution, and consultation to an expert before taking any action.



Submitted by David Mertz on Fri, 2016-08-05 12:51

Since the distribution that was rolled over occurred in 2015, the deadline for making a return of contribution before the extended due date of the 2015 tax return has not yet passed if the 2015 tax return or request for extension was timely filed.  Assuming timely filing or extension request, if the return of the rollover contribution is made by October 17, 2016 it would be under 408(d)(4) rather than 408(d)(5)(B).  If not corrected by the extended due date of the 2015 tax return the excess contribution would be subject to a 6% excess-contribution penalty for 2015, so there is some urgency in resolving this if it indeed represents an excess contribution to the IRA.



Submitted by David Mertz on Fri, 2016-08-05 13:32

  • Also, I can’t imagine that they would be asking for the money back if they were not intending on reinstating your interest in the pension and continuing to make pension payments to you.  You would want to confirm this before taking any action.  They should not be asking for amounts back that you would have been paid as pension payments for the period between the time that pension payments were terminated and the time that they are reinstated unless they are planning on subsequently making those late pension payments to you.
  • If some amount of money is returned to them, they’ll either have to make that not taxable by issuing a corrected 2015 From 1099-R to change the amount distributed, as if the lump-sum distribution never happened, or you may be able to take a claim of right deduction or tax credit on your tax return for the year in which you make the repayment for the tax on the amount distributed.  Before taking any action you’ll want to confirm with them how they will handle the reporting.


Submitted by Diane Connolly on Fri, 2016-08-05 15:04

Something that is also an issue.  I’m 70 1/2 this year (2016). I’m required to take RMD from the IRA.  What would anyone suggest, I’m certainly not inclined not to take the required distribution because of the penalty in not doing so.  To say this whole situation is a nightmare is an understatement.  Maybe someone would suggest me holding off and taking 2 distributions next year to catch up but I really don’t want to do that because the taxes due would be higher rather than taking a distribution this year and another next year.Can someone explain simply what “that claim of right deduction” is and explain it with an example.  Is not the company responsible for any and all taxes because they created this error……Can you imagine sending it back and being left holding the bag for $75,000 in taxes – that cannot be right.I’m still appealing the claim denial but whether I get an answer back by that October date is questionable.  My hands are pretty much tied here.    



Submitted by David Mertz on Fri, 2016-08-05 16:51

  • I’m not sure, but if you receive a return of contribution from the IRA before the extended due date of your 2015 tax return, the 2015 year-end balance on which you base your 2016 IRA RMD might be reduced by the amount distributed for the return of contribution.
  • Claim of right, with examples, is described in 2015 IRS Pub 525, Repayments:  https://www.irs.gov/publications/p525/ar02.html#en_US_2015_publink1000229600


Submitted by Diane Connolly on Fri, 2016-08-05 23:25

I cannot seem to find any solid information on who is responsible for taxes that resulted from a company rolling over an lump sum into an IRA.  I think it’s referred to access contribution???  Am I correct?  Does the IRS expect a individual to take the “fall” because the company made an alleged error.  Based on everything I’ve read here, it seems that if I put my “hands” on this IRA I’m taking responsibily for the error.  I’ve searched the I. R. S. web-site and cannot find any definitive instruction for an individual.  I did see some corrective measures anf forms BUT I understood it that it was put there for a company who created the error. Please confirm…… 



Submitted by Alan - IRA critic on Fri, 2016-08-05 23:59

  • Once the rollover is identified by the plan as not eligible for rollover, that creates an excess contribution to the IRA to the extent you are not eligible for make a regular IRA contribution. In 2015 you apparently were not yet 70.5 so you were eligible for a 6,500 regular IRA contribution if you had that much earned income that year and did not make a regular contribution. You would then be able to leave 6,500 in the IRA and treat it as a regular contribution. To be clear, an IRA excess contribution is created regardless of who made the error. But you may end up contesting that the rollover was an error, and I would not take a distribution from the IRA until the plan makes the situation clearer, and you decide not to contest their decision. However, if you contest their decision and lose, then you are on the hook for a 6% excise tax on the amount of the disallowed rollover for each year the excess stays in the IRA starting with 2015.
  • More bad news. The IRA balance on 12/31/2015 used to calculate your 2016 RMD does not exempt excess contributions held in the IRA. But the amount you distribute to correct an IRA excess contribution does NOT count toward your RMD for the year. Not very equitable when the whole situation is not your fault.
  • It is probably worthwhile to verify that your QDRO is actually a shared interest QDRO and not a separate share QDRO. Was your ex already receiving benefits when the QDRO was submitted? What type of retirement plan was he in (401k, defined benefit, or hybrid plan)?


Submitted by Diane Connolly on Mon, 2016-08-08 01:22

Yes, he was already receiving pension benefits.  Yes, it is a defined benefit.  As far as the RMD I had every intention while waiting for the dirty dust to settle – to take the corrrect percentage out because if in fact I win my appeal I would then have taken the correct amount and not be subject to penalities.  If I reduce the amount pretending that it might be gone any day then I’m sure you would agree that would make matters worse because if the funds are still there as of now and I’m under estimating the distrubution.  How and who declares it an excess into an IRA.  I sure someone within the company would be required to step up to the plate and say yes we made his error, we rolled it over.  If I also understand you correctly If I take the larger amount as a distribution because the funds are there and later on they are removed, the taxes paid on the $145,000 is lost in “credit.”  I could always file an amended 8606, correct?  The IRS will not realize that an error happened which I have no control. 



Submitted by Alan - IRA critic on Mon, 2016-08-08 03:54

  • It looks like you DO have a shared payments QDRO. What is your understanding of the payments you were receiving in the event of your death OR in the event of your ex’s death?   The answer to that question might explain why the plan pursued the amendment and wants your lump sum back.     https://www.qdrodrafting.com/issues/InterestvsPayment.php
  • Again, with respect to your RMD, due to these unique circumstances the IRS would likely waive any penalty for a delinquent RMD based on the balance of the rollover. However, even if the penalty is waived if you had to make up late RMDs, you would have more than one taxable in the same year, the same as if you deferred this year’s RMD to 2017.
  • The excess IRA contribution is identified if the plan revises the 1099R. That would trigger the 6% excise tax if you did not remove the rollover amount with allocated earnings by 10/15/2016. A separate issue is the RMD which is based on the actual balance on 12/31/2015.
  • The taxes on the 145k would be generated by the plan 1099R showing that amount not eligible for rollover. If you pay those taxes, then you might qualify for a tax credit against those taxes under claim of right because the plan demanded return of the distribution. That would leave you roughly even except for the IRA distribution. If you take out the rollover as an excess contribution to the IRA by 10/15 with allocated earnings, only the earnings in the IRA will be taxable, probably a small amount or perhaps nothing. Because of all these unknowns, I think that you probably will not be making an IRA Distribution by 10/15, which is the extended due date. If you withdraw the rollover after 10/15 earnings are NOT withdrawn, but then you should qualify for 408(d)(5)B under which you are not taxed on the IRA distribution because it was caused by incorrect rollover information from the plan. I don’t think you would need an 8606 for that since the distribution of basis is not being pro rated.


Submitted by David Mertz on Mon, 2016-08-08 15:50

  • Googling  —  pension repayment “claim of right”  —  produces a number of interesting references, including this one:
  • http://www.proskauer.com/files/News/8b58cdcd-4038-4d01-bf45-825b5e4761c6/Presentation/NewsAttachment/26db2a0c-2e70-44bf-9d0a-0452a1cffa20/erisa-litigation-august-2014.pdf
  • If it’s ultimately determined that the lump-sum payment was not eligible for rollover and you must repay an amount to the pension plan, I would expect roughly the following:  A return of contribution distribution from the IRA with the IRA administrator reporting only the earnings portion of that distribution as being taxable, an amendment to the tax return for the year that you did the rollover (2015) to show that no rollover was done and therefore the pension distribution is taxable (possibly also showing up to $6,500 of regular IRA contribution if an amount is left in the IRA to be treated as an eligible regular contribution), and on the tax return for the year in which the repayment is made a claim-of-right tax credit for the additional tax liability that results on the amended tax return from the payment not being eligible for rollover.  Disregarding any 6% excess contribution penalties for not making the return of contribution by the extended due date of your 2015 tax return, 10/17/2016, the net result would be taxes only on the earnings.  (I’m not sure how to handle all of this with this IRS without temporarily having to pay the additional 2015 tax liability while awaiting the tax refund resulting from the claim of right.  The additional 2015 tax liability may also be subject to interest which the IRS will assess.)
  • You would also need to do the same with your state tax returns if the amount not eligible for rollover is also subject to taxes in your state.
  • The plan would also need to pay you or make an offset for the back pension payments since they should be reinstating your interest in the pension (which you’ll need to confirm) retroactive to the point it was originally terminated.


Submitted by Diane Connolly on Thu, 2017-03-30 19:14

Update – Company is still demanding return of entire pension buyout that was rolled over into an IRA . Since my last posting in 8/2016 I have lost both a claim and appeal decision.  The funds are still in an IRA and I think it’s important to mention to everyone who posted valuable comments to my situation that the Pension Buyout was added to an already existing IRA that I have had for many years.  As had been suggested here, I should not consider the RMD but wait until this situation was resolved with the Company.  But unfortuntely, I ran out of time for any response from them and the later part of 2016 (when I turned 70 1/2) I had no choice but to take the required distribution.  I reported it on a 8606 for tax year 2016 return.  The RMD was based on the total of the retirement account not just the rollover in dispute.  I didn’t want to have any problems and complicate things anymore than they are right now.  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 Company error is required to correct any errors to pension plans and notifiy the IRS accordingly. They also have other avenues for corrections to the plan namely the outsource company they hired to work the pension buyout program as well as liability insurance for company errors. This has not been done.  It is still my understanding that if the funds are removed it creates another distribution and it is fully taxed.  Obviously the IRS procedure is not actually a ruling but just a procedure and it is not being followed.  I am of the belief that once pension money leaves a plan and is distributed it is no longer under the austice of ERISA.  I’m still being required to send the money orders together with an additional $5,000 in interest.  But, the Company has also stated that  ERISA does NOT permit or are they required to indemnify me of any and all tax consequences.  Namely, they are not allowd or required to rectify or take responsibility for the huge tax consequences 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 amount while I attempt to further this issue.  The 1099R still reflects a distribution to a qualified retirement account. Are IRA accounts protected somewhat based on state statue?  Should I make yet another RMD for 2017?  Is anyone familar with the ultimate responsibility of the huge tax consequences.  The Company also refused to file a ruling letter regarding this issue.  But I still go back to what I researched with IRS that plans are required to correct plan errors and that being notifying them that an error was made and filing the correct documents to exhonorate from any wrongdoing.  Is  there an advantage to me that the 1099R is still in a rollover status. SEE older postings under lump sum pension buyout – co wants funds returned …..



Submitted by [email protected] on Thu, 2017-03-30 22:58

I have no business responding to this as I am in no way a tax/legal advisor, but I’m wondering that if it ends up that you are required to take a distribution to “pay them back”, why not elect a withholding amount for tax liability.  That way, the taxes owed/paid by you come out of the balance of the account that you send back to them? – m



Submitted by Jessica Ricci on Fri, 2017-03-31 13:48

Update – Company is still demanding return of entire pension buyout that was rolled over into an IRA . Since my last posting in 8/2016 I have lost both a claim and appeal decision. The funds are still in an IRA and I think it’s important to mention to everyone who posted valuable comments to my situation that the Pension Buyout was added to an already existing IRA that I have had for many years. As had been suggested here, I should not consider the RMD but wait until this situation was resolved with the Company. But unfortuntely, I ran out of time for any response from them and the later part of 2016 (when I turned 70 1/2) I had no choice but to take the required distribution. I reported it on a 8606 for tax year 2016 return. The RMD was based on the total of the retirement account not just the rollover in dispute. I didn’t want to have any problems and complicate things anymore than they are right now. 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 Company error is required to correct any errors to pension plans and notifiy the IRS accordingly. They also have other avenues for corrections to the plan namely the outsource company they hired to work the pension buyout program as well as liability insurance for company errors. This has not been done. It is still my understanding that if the funds are removed it creates another distribution and it is fully taxed. Obviously the IRS procedure is not actually a ruling but just a procedure and it is not being followed. I am of the belief that once pension money leaves a plan and is distributed it is no longer under the austice of ERISA. I’m still being required to send the money orders together with an additional $5,000 in interest. But, the Company has also stated that ERISA does NOT permit or are they required to indemnify me of any and all tax consequences. Namely, they are not allowd or required to rectify or take responsibility for the huge tax consequences 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 amount while I attempt to further this issue. The 1099R still reflects a distribution to a qualified retirement account. Are IRA accounts protected somewhat based on state statue? Should I make yet another RMD for 2017? Is anyone familar with the ultimate responsibility of the huge tax consequences. The Company also refused to file a ruling letter regarding this issue. But I still go back to what I researched with IRS that plans are required to correct plan errors and that being notifying them that an error was made and filing the correct documents to exhonorate from any wrongdoing. Is there an advantage to me that the 1099R is still in a rollover status. SEE older postings under lump sum pension buyout – co wants funds returned ..



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