1099-R distribution ended up in Retirement Clearinghouse - what now?

[porky2]

I was given a 403(b) by my employer a month before I left the organization, and ended up contributing a very small amount (matched by the employer) - just over $50 total.  I was given a login but never any documentation.  I did not even realize I had the account until a relative was helping me do our taxes last spring (2021).  At that time, it was very confusing - the latest statement showed that my full balance had been distributed, but I didn't know why, since I certainly didn't initiate it.

Fast forward a year.  I get a 1099-R from the organization for that distribution, but haven't seen the money anywhere.  I also get a single sheet of paper in the mail from another organization that states, "You have a Retirement Clearinghouse IRA established by a former employer."

After investigating, it looks like my 403(b) was - completely without ANY notice to me - rolled over to Retirement Clearinghouse.  Just over half was invested, with an additional $25 being converted to cash for fees, which were then subtracted from the account at $2.50 a month.  This happened between March 2021 and March 2022.  The first I ever heard about it was just a week ago - March 2022.

I'm now filing my taxes and need to figure out what to do with the 1099-R from my defunct 403(b).  The "distribution" never reached me and is now nearly worthless because of all the fees that were taken out.  I investigated the account at Retirement Clearinghouse and see that there are fees ranging from $30 to $59 that I would be charged should I try to retrieve or roll over my money, so basically it's just completely gone.

Do I still report the "distribution" on my taxes as if I received it?  Is there any way to report the fees that Retirement Clearinghouse took out of my account, in order to show that I in fact did not receive the distribution?  I've never heard of anything like this happening, and didn't even know that I should be on the lookout for it.  The organization that originated my (granted, very small) retirement account provided me with no information whatsoever about what was happening to my account.

[RaifH]

Yes, the 1099-R that you received does need to be reported on your tax return. If it has a Distribution Code of "G" in Box 7, then that indicates it was rolled over into another retirement account and it would not be taxable. 

Even if it has a different distribution code, you can still tell TurboTax that the entire amount was rolled over and therefore not taxable. After entering the 1099-R, you should be asked Tell us if you moved the money through a rollover or conversion select I rolled over some or all of it to an IRA or other retirement account within the time limits (normally 60 days).

Unfortunately, any fees the retirement accounts charge you for account maintenance and other miscellaneous charges are not deductible on your federal tax return. 

[porky2]

Thank you, this is very helpful.

Does anyone have any advice or thoughts about what to do about the situation overall - apart from reporting it correctly on my tax return?  From reading, I see that the organization that originally held my retirement money was required to notify me about the automatic rollover, but they did not do so.  Has anyone else ever dealt with this?  What's the right way forward?

[ColeenD3]

The right way forward is to just report it as described by @RaifH. The company messed up, but there is no way to go back in time and undo what they did.

[porky2]

Thanks!  I understand that and will report it in my tax form exactly as suggested.  At this point, I'm wondering if anyone has experience dealing with such things insofar as addressing the company that messed up.  It's a pittance anyway (only about $58), but they did mess up.  I've struggled somewhat with understanding exactly what should have happened, so if anyone has resources that they could share about that, I'd be most grateful.

[Cynthiad66]

It is good to notify companies about errors and how they affected you so that they can make corrections.  This will help them to manage their reports better.  Just explain what happened in detail so that they can perhaps tell you how and why it happened.  Glad that you have resolved your issue with our great experts assistance.

@porky2

[Opus 17]

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@porky2 wrote:

Thank you, this is very helpful.

Does anyone have any advice or thoughts about what to do about the situation overall - apart from reporting it correctly on my tax return?  From reading, I see that the organization that originally held my retirement money was required to notify me about the automatic rollover, but they did not do so.  Has anyone else ever dealt with this?  What's the right way forward?

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There isn't any tax way to get that money back.  Lots of private IRAs charge maintenance fees, $2.50 per month is not so much against $100,000 but is obviously a lot against $50.  

I believe your former employer was required to give you advance warning that your account was too small for them to maintain as an ex-employee.  You had the choice of taking a withdrawal (and paying tax plus a penalty), or doing your own rollover (to a private IRA or a qualified plan at your new employer).  Since you didn't answer within the required time frame, your ex employer completed a rollover for you.  This is what they were allowed to do, but it sounds like they didn't notify you.

Did you change addresses or other contact information and not tell them?  Did you have an exit interview with HR?  The issue of qualified accounts should be brought up there.  

Potentially maybe you could take them to small claims court, if you can show they never attempted to notify you of your rights and options.  They did have a fiduciary duty to you.  

And complaining to the HR manager might help them improve their process.

But there's nothing you can put on your tax return to get the money back.