"The Fidelity 403(B) group is quite adamant about the necessity of filing the Form 5329 which calculates a 25% penalty on the RMD that was impermissibly rolled over"
They are wrong. There was indeed a distribution from the 403(b), and the first amounts distributed are deemed to be RMD until the RMD is satisfied. In this case, it's just that, once distributed, the RMD portion of that distribution was impermissibly rolled over. Had the distribution not included the RMD, the entire distribution would have been eligible for rollover. The distribution can't be partly ineligible for rollover due to being partly RMD without being partly the RMD. The RMD was satisfied by this distribution, so there is no excess accumulation that needs to be addressed on Part IX of Form 5329.
I'll repeat: With the return of contribution completed timely, nothing at all will be reportable on Form 5329 with regard to any of this.
With the subsequent distribution of the excess IRA contribution before the due date of the 2025 tax return, there will also be no excess traditional IRA contribution to report on Form 5329. Assuming that this distribution is made in 2025, the distribution will be reported on a code 8 2025 Form 1099-R. Given recent market performance, I assume that there will be an attributable gain that must accompany the distribution of the RMD amount. That gain will be taxable on your 2025 tax return. Box 1 of that form will have in box 1 the sum of the RMD and the gain, box 2a will show just the gain, and the IRA/SEP/SIMPLE box will be marked.
As I said earlier, the code G Form 1099-R will show the total distributed, so you yourself will need to split that into two, one with code G for the part that was permissibly rolled over and another with code 7 for the portion that was impermissibly rolled over.
The only real question is whether my assumption that the RMD for both 403(b) accounts must be satisfied before any other amounts are permitted to be rolled over from either 403(b) is correct. If that assumption is incorrect, then the rollover included only the RMD for the Fidelity account, not the RMD for the TIAA-CREF account. Fidelity might not want to consider any more that the RMD for just the Fidelity 403(b) as having been impermissibly rolled over and that only that amount is eligible to be returned (along with a distribution of attributable earnings.
