We have a situation where an FP rolled over a client’s Roth 401(k) account in March 2020. In October 2024, it was discovered that this rollover was set up and deposited into a TIRA account. Note, it took four years to discover the error.

Reviewing the paperwork there were some cross outs and certain contradictory boxes checked. The check received from the custodian was clearly made out for a Roth IRA account FBO the client. An accompanying letter indicated rollover IRA. The custodian claims to have record of calling the FP and was told open a rollover IRA.

The 401(k) company correctly coded the 1099r with a Code H, rollover from a  designated Roth account…

In the meantime, the custodian for the money manager was purchased. We’ve consulted CPA and other tax professionals who state that re-registering the account as a Roth IRA is the preferred course of action.

We requested a re-registration of the account to a Roth and provided Letter of Indemnity for the custodian and intermediary.

We were rejected stating the custodian could not do this, too much time had passed.

This topic has been discussed on this forum in the last three to four years. As we all know a Roth 401(k) account may not be rolled into anything but a Roth IRA account. If this happens it is an ineligible rollover and the proceeds and any earnings need to be removed.  Suggestions from this forum have been to request a reconstruction of the transaction i.e. re-register the account as a Roth. Another is to utilize RP 2020-46 for self certification for missed 60 day rollover and provide full explanation of the situation. Yet another was to track the Roth money in the IRA and I suspect use the prorata rule on distributions.

A final thought was a PLR. The account is much too small to make this a viable option.

Are there any newer thoughts? Any facts or answers I haven’t laid out?

Thank you