Rollover to IRA from 403(b) that no longer exists

Home Fairmark Forum Retirement Savings and Benefits Rollover to IRA from 403(b) that no longer exists

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  • #4710
    3plustitanium
    Participant

    I am retired, and rolled over my 403(b) plan into an IRA last year. I just received a check from a Settlement Administrator who explained that this was my share of the settlement of a class-action suit against my former employer in compensation for excessive fees. The check was accompanied by a substitute 1099-R for 2019 with a Distribution code of 7, indicating a Normal Distribution, along with a letter stating that I could either cash the check and pay the tax, or do a rollover and avoid the tax.

    If I cash the check, can I reduce the amount of my 2019 distribution from my IRA by the amount of the check when I take my RMD at year-end? Or, will the IRS still want me to remove the full amount of my RMD from my IRA since the check came from somewhere else?

    Otherwise, I will have to roll the check over into my IRA. Am I allowed to do this in a situation in which the 403(b) from which the check came no longer exists?

    #4713
    Alan S.
    Participant

    This is a restorative payment, and you can either cash it or roll it over to your IRA. Since there was no 12/31/2018 balance in your 403b, this will not be considered as a plan RMD, and is therefore rollover eligible.

    However, this has no effect on your IRA RMD, which you will still have to satisfy in its entirety.

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