Correcting a Vanguard mistake - IRA distribution

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Iowa David
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Correcting a Vanguard mistake - IRA distribution

Post by Iowa David »

I am in the process of moving a Rollover IRA to my current 401K provider.

As part of the IRA process,Vanguard accidentally distributed funds from my Traditional IRA and not my Rollover IRA.

I called Vanguard Customer Service and they confirmed that in the IRA Distribution paperwork that I did properly designate the Rollover IRA account number and they would begin working with the customer care team to fix the issue.

Meanwhile, I have received the physical distribution check from the Traditional IRA. I plan to do nothing with this check.

I'm hoping this mistake will be easily corrected, but are there other steps that I should be taking to help ensure there is not any confusion with what is reported to the IRS and future tax filings?

(I'm also a bit miffed because I'm wanting to get these funds deposited into my 401K provider in order to get the quarterly dividend payments and I have a feeling I'm going to miss this window by the time a new check is sent, deposited into my 401K provider and new assets are purchased).
"Just a 1 percent difference in expenses makes an 18 percent difference in returns when compounded over 20 years." The Boglehead's Guide to Investing
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galawdawg
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Re: Correcting a Vanguard mistake - IRA distribution

Post by galawdawg »

I'm sure certain VG supporters who chime in on these types of threads will be here soon to tell you it is your fault or make excuses for VG. :shock:

Since VG is not open today, I'd recommend on Monday that you contact them, have this escalated, and insist they correct the problem immediately, void the improper distribution, and make you whole if their error resulted in any financial loss.

If Vanguard doesn't comply, you may wish to file a complaint with FINRA and consider other brokerages, such as Fidelity or Schwab.

Good luck.
Digital Dave
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Re: Correcting a Vanguard mistake - IRA distribution

Post by Digital Dave »

Without going into the details, the error the OP experienced happened to me.
During the process, I kept on top of it and when I saw the error, I started hollering.
It was fixed without causing more troubles for me.
Investing in Mutual Funds, ETF's, Forever Stamps and Bittulips.
Alan S.
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Re: Correcting a Vanguard mistake - IRA distribution

Post by Alan S. »

Iowa David wrote: Sat Jun 12, 2021 10:18 am I am in the process of moving a Rollover IRA to my current 401K provider.

As part of the IRA process,Vanguard accidentally distributed funds from my Traditional IRA and not my Rollover IRA.

I called Vanguard Customer Service and they confirmed that in the IRA Distribution paperwork that I did properly designate the Rollover IRA account number and they would begin working with the customer care team to fix the issue.

Meanwhile, I have received the physical distribution check from the Traditional IRA. I plan to do nothing with this check.

I'm hoping this mistake will be easily corrected, but are there other steps that I should be taking to help ensure there is not any confusion with what is reported to the IRS and future tax filings?

(I'm also a bit miffed because I'm wanting to get these funds deposited into my 401K provider in order to get the quarterly dividend payments and I have a feeling I'm going to miss this window by the time a new check is sent, deposited into my 401K provider and new assets are purchased).
You didn't indicate exactly how this error affects you. Could it be:
1) The amount of the check varies materially from what you wanted to roll over.
2) You had to certify to the 401k plan that the rollover was from a "rollover IRA", as otherwise they would not accept it.
3) The investments that were liquidated will force you to make asset allocation changes to the rollover IRA.
4) Other factors regarding investments that were liquidated
5) The account distributed affects your beneficiary allocations since they are not identical across all accounts.
6) Other, or no material downside, but you are just irritated that VG did not follow your instructions.

The only difference on the 1099R that will be issued is the amount and the account number of the distributing account. And the IRS does not care about which account was distributed.
Godzilla
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Re: Correcting a Vanguard mistake - IRA distribution

Post by Godzilla »

What does it matter how it affects the OP. His broker made an error and admits to it. How in the world should he NOT need to have this corrected.
Godzilla
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Re: Correcting a Vanguard mistake - IRA distribution

Post by Godzilla »

galawdawg wrote: Sat Jun 12, 2021 10:30 am I'm sure certain VG supporters who chime in on these types of threads will be here soon to tell you it is your fault or make excuses for VG. :shock:



Good luck.
Yup.
Godzilla
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Re: Correcting a Vanguard mistake - IRA distribution

Post by Godzilla »

galawdawg wrote: Sat Jun 12, 2021 10:30 am I'm sure certain VG supporters who chime in on these types of threads will be here soon to tell you it is your fault or make excuses for VG. :shock:



Good luck.
Yup.
Alan S.
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Re: Correcting a Vanguard mistake - IRA distribution

Post by Alan S. »

Godzilla wrote: Sat Jun 12, 2021 6:22 pm What does it matter how it affects the OP. His broker made an error and admits to it. How in the world should he NOT need to have this corrected.
No, his broker did not make the error or admit to anything. OP made the error by not showing the desired IRA account number. Usually, the custodian has no obligation to correct such errors, and referral to the customer care center may not mean much.

Therefore, the consequences of this error should be considered by the OP to determine how much VG should be pushed to make the change. If there are no real consequences, it may not be worth expending too much time or effort.

In some scenarios OP would actually be better off retaining the rollover IRA for future benefits such as possible future rollovers to a new employer plan, or for better creditor protection in some states for rollover IRAs.
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galawdawg
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Re: Correcting a Vanguard mistake - IRA distribution

Post by galawdawg »

Alan S. wrote: Sat Jun 12, 2021 7:14 pm
Godzilla wrote: Sat Jun 12, 2021 6:22 pm What does it matter how it affects the OP. His broker made an error and admits to it. How in the world should he NOT need to have this corrected.
No, his broker did not make the error or admit to anything. OP made the error by not showing the desired IRA account number. Usually, the custodian has no obligation to correct such errors, and referral to the customer care center may not mean much.

Therefore, the consequences of this error should be considered by the OP to determine how much VG should be pushed to make the change. If there are no real consequences, it may not be worth expending too much time or effort.

In some scenarios OP would actually be better off retaining the rollover IRA for future benefits such as possible future rollovers to a new employer plan, or for better creditor protection in some states for rollover IRAs.
What??? The title of this thread is Correcting a Vanguard mistake - IRA distribution.

And OP says:
Iowa David wrote: Sat Jun 12, 2021 10:18 am I called Vanguard Customer Service and they confirmed that in the IRA Distribution paperwork that I did properly designate the Rollover IRA account number and they would begin working with the customer care team to fix the issue.
Did you misread the OP's post?
CedarWaxWing
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Re: Correcting a Vanguard mistake - IRA distribution

Post by CedarWaxWing »

Alan S. wrote: Sat Jun 12, 2021 5:17 pm
Iowa David wrote: Sat Jun 12, 2021 10:18 am I am in the process of moving a Rollover IRA to my current 401K provider.

As part of the IRA process,Vanguard accidentally distributed funds from my Traditional IRA and not my Rollover IRA.

I called Vanguard Customer Service and they confirmed that in the IRA Distribution paperwork that I did properly designate the Rollover IRA account number and they would begin working with the customer care team to fix the issue.

Meanwhile, I have received the physical distribution check from the Traditional IRA. I plan to do nothing with this check.

I'm hoping this mistake will be easily corrected, but are there other steps that I should be taking to help ensure there is not any confusion with what is reported to the IRS and future tax filings?

(I'm also a bit miffed because I'm wanting to get these funds deposited into my 401K provider in order to get the quarterly dividend payments and I have a feeling I'm going to miss this window by the time a new check is sent, deposited into my 401K provider and new assets are purchased).
You didn't indicate exactly how this error affects you. Could it be:
1) The amount of the check varies materially from what you wanted to roll over.
2) You had to certify to the 401k plan that the rollover was from a "rollover IRA", as otherwise they would not accept it.
3) The investments that were liquidated will force you to make asset allocation changes to the rollover IRA.
4) Other factors regarding investments that were liquidated
5) The account distributed affects your beneficiary allocations since they are not identical across all accounts.
6) Other, or no material downside, but you are just irritated that VG did not follow your instructions.

The only difference on the 1099R that will be issued is the amount and the account number of the distributing account. And the IRS does not care about which account was distributed.
Allan,

If I were the OP I would be thinking that I have a contribution basis in my traditional Ira, but do not have a contribution basis in my Rollover IRA...(assuming that to be the case) it would be important to get the Rollover sent to his new employer's 401K account.

Keeping the t IRA basis isolated from 401k funds could be important when it comes to the eventual roth conversions the OP may someday be doing on the account that has a contribution basis before eventually again rolling over his 401 K account on the year after the conversions are completed. Who's fault this is seems to me to not be important... but straightening things out seems to be a prudent thing to do.

best,

M
Alan S.
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Re: Correcting a Vanguard mistake - IRA distribution

Post by Alan S. »

galawdawg wrote: Sat Jun 12, 2021 7:22 pm
Alan S. wrote: Sat Jun 12, 2021 7:14 pm
Godzilla wrote: Sat Jun 12, 2021 6:22 pm What does it matter how it affects the OP. His broker made an error and admits to it. How in the world should he NOT need to have this corrected.
No, his broker did not make the error or admit to anything. OP made the error by not showing the desired IRA account number. Usually, the custodian has no obligation to correct such errors, and referral to the customer care center may not mean much.

Therefore, the consequences of this error should be considered by the OP to determine how much VG should be pushed to make the change. If there are no real consequences, it may not be worth expending too much time or effort.

In some scenarios OP would actually be better off retaining the rollover IRA for future benefits such as possible future rollovers to a new employer plan, or for better creditor protection in some states for rollover IRAs.
What??? The title of this thread is Correcting a Vanguard mistake - IRA distribution.

And OP says:
Iowa David wrote: Sat Jun 12, 2021 10:18 am I called Vanguard Customer Service and they confirmed that in the IRA Distribution paperwork that I did properly designate the Rollover IRA account number and they would begin working with the customer care team to fix the issue.
Did you misread the OP's post?
Yes, exactly. I misread it. Sorry about that.
Therefore, VG should not hesitate to correct their error.
placeholder
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Re: Correcting a Vanguard mistake - IRA distribution

Post by placeholder »

CedarWaxWing wrote: Sun Jun 13, 2021 2:34 pm
If I were the OP I would be thinking that I have a contribution basis in my traditional Ira, but do not have a contribution basis in my Rollover IRA...(assuming that to be the case) it would be important to get the Rollover sent to his new employer's 401K account.

Keeping the t IRA basis isolated from 401k funds could be important when it comes to the eventual roth conversions the OP may someday be doing on the account that has a contribution basis before eventually again rolling over his 401 K account on the year after the conversions are completed. Who's fault this is seems to me to not be important... but straightening things out seems to be a prudent thing to do.
That would be incorrect thinking as basis does not attach to a particular ira but over ALL corresponding iras which would include rollover iras and contributory tiras.
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galawdawg
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Re: Correcting a Vanguard mistake - IRA distribution

Post by galawdawg »

Alan S. wrote: Sun Jun 13, 2021 6:40 pm
galawdawg wrote: Sat Jun 12, 2021 7:22 pm
Alan S. wrote: Sat Jun 12, 2021 7:14 pm
Godzilla wrote: Sat Jun 12, 2021 6:22 pm What does it matter how it affects the OP. His broker made an error and admits to it. How in the world should he NOT need to have this corrected.
No, his broker did not make the error or admit to anything. OP made the error by not showing the desired IRA account number. Usually, the custodian has no obligation to correct such errors, and referral to the customer care center may not mean much.

Therefore, the consequences of this error should be considered by the OP to determine how much VG should be pushed to make the change. If there are no real consequences, it may not be worth expending too much time or effort.

In some scenarios OP would actually be better off retaining the rollover IRA for future benefits such as possible future rollovers to a new employer plan, or for better creditor protection in some states for rollover IRAs.
What??? The title of this thread is Correcting a Vanguard mistake - IRA distribution.

And OP says:
Iowa David wrote: Sat Jun 12, 2021 10:18 am I called Vanguard Customer Service and they confirmed that in the IRA Distribution paperwork that I did properly designate the Rollover IRA account number and they would begin working with the customer care team to fix the issue.
Did you misread the OP's post?
Yes, exactly. I misread it. Sorry about that.
Therefore, VG should not hesitate to correct their error.
Happens to us all! As I get older, I find myself spending more and more time extracting my foot from my mouth!
:beer
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Stinky
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Re: Correcting a Vanguard mistake - IRA distribution

Post by Stinky »

Iowa David wrote: Sat Jun 12, 2021 10:18 am I am in the process of moving a Rollover IRA to my current 401K provider.

As part of the IRA process,Vanguard accidentally distributed funds from my Traditional IRA and not my Rollover IRA.

I called Vanguard Customer Service and they confirmed that in the IRA Distribution paperwork that I did properly designate the Rollover IRA account number and they would begin working with the customer care team to fix the issue.

Meanwhile, I have received the physical distribution check from the Traditional IRA. I plan to do nothing with this check.

I'm hoping this mistake will be easily corrected, but are there other steps that I should be taking to help ensure there is not any confusion with what is reported to the IRS and future tax filings?

(I'm also a bit miffed because I'm wanting to get these funds deposited into my 401K provider in order to get the quarterly dividend payments and I have a feeling I'm going to miss this window by the time a new check is sent, deposited into my 401K provider and new assets are purchased).
Please let us know how this turns out for you. Hopefully VG will fix this with minimal muss and fuss.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
CedarWaxWing
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Re: Correcting a Vanguard mistake - IRA distribution

Post by CedarWaxWing »

placeholder wrote: Sun Jun 13, 2021 6:47 pm
CedarWaxWing wrote: Sun Jun 13, 2021 2:34 pm
If I were the OP I would be thinking that I have a contribution basis in my traditional Ira, but do not have a contribution basis in my Rollover IRA...(assuming that to be the case) it would be important to get the Rollover sent to his new employer's 401K account.

Keeping the t IRA basis isolated from 401k funds could be important when it comes to the eventual roth conversions the OP may someday be doing on the account that has a contribution basis before eventually again rolling over his 401 K account on the year after the conversions are completed. Who's fault this is seems to me to not be important... but straightening things out seems to be a prudent thing to do.
That would be incorrect thinking as basis does not attach to a particular ira but over ALL corresponding iras which would include rollover iras and contributory tiras.
Would not getting his Rollover IRA back into a 401k at the employer solve that issue and make conversions of his t IRA more efficient, tax wise?
placeholder
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Re: Correcting a Vanguard mistake - IRA distribution

Post by placeholder »

CedarWaxWing wrote: Mon Jun 14, 2021 4:42 pm Would not getting his Rollover IRA back into a 401k at the employer solve that issue and make conversions of his t IRA more efficient, tax wise?
It doesn't have to be the rollover ira just ira money equal to the pretax amount.
RubyTuesday
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Re: Correcting a Vanguard mistake - IRA distribution

Post by RubyTuesday »

Iowa David wrote: Sat Jun 12, 2021 10:18 am I am in the process of moving a Rollover IRA to my current 401K provider.

As part of the IRA process,Vanguard accidentally distributed funds from my Traditional IRA and not my Rollover IRA.

I called Vanguard Customer Service and they confirmed that in the IRA Distribution paperwork that I did properly designate the Rollover IRA account number and they would begin working with the customer care team to fix the issue.

Meanwhile, I have received the physical distribution check from the Traditional IRA. I plan to do nothing with this check.

I'm hoping this mistake will be easily corrected, but are there other steps that I should be taking to help ensure there is not any confusion with what is reported to the IRS and future tax filings?

(I'm also a bit miffed because I'm wanting to get these funds deposited into my 401K provider in order to get the quarterly dividend payments and I have a feeling I'm going to miss this window by the time a new check is sent, deposited into my 401K provider and new assets are purchased).
Hope you don’t abandon your thread after asking for help. Would like to hear feedback on resolution.
“Doing nothing is better than being busy doing nothing.” – Lao Tzu
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Iowa David
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Re: Correcting a Vanguard mistake - IRA distribution

Post by Iowa David »

RubyTuesday wrote: Tue Jun 15, 2021 6:27 am
Hope you don’t abandon your thread after asking for help. Would like to hear feedback on resolution.
@RubyTuesday - Vanguard has credited my IRA account, however, I am still waiting for them to initiate the distribution for my Rollover IRA. I was told this may take about 10-14 days so I'm still in a waiting period.

I'll provide another update once this gets fully resolved. Appreciate your and others input on this topic.
"Just a 1 percent difference in expenses makes an 18 percent difference in returns when compounded over 20 years." The Boglehead's Guide to Investing
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Iowa David
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Re: Correcting a Vanguard mistake - IRA distribution

Post by Iowa David »

[Update]

@RubyTuesday - The IRA distribution has almost been fixed. I received the distribution check in mid-July and was able to easily deposit it into my current employers 401K via the Fidelity App. (The deposit was posted within 48 hours and I was able to reallocate my portfolio with the new amount.) However, my previous Rollover IRA had a dividend payment during the process so I still have a few dollars sitting in my Vanguard account that I'm waiting for them to issue a 2nd check amount for.

I'm optimistic that this will get get fully dealt with within the next few weeks, but I plan to follow up later this week.

When I asked the Vanguard rep what happened, I was told that a "manual" processing error occurred. I still plan to keep our brokerage, Roth and 529 accounts with Vanguard, but I'll admit that this process has been a bit frustrating.
"Just a 1 percent difference in expenses makes an 18 percent difference in returns when compounded over 20 years." The Boglehead's Guide to Investing
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