waid10 Posted July 14, 2021 Share Posted July 14, 2021 Hi. We mistakenly distributed a lot of 401k plan account balances to participants when there wasn't a distributable event. Our correction plan is to seek return of the distributed amounts, and then use the DOL calculator to adjust for earnings. We have been informed that 1 participant took their mistaken 401k distribution and rolled it into our 403b plan. The 403b plan has the exact same fund lineup, and the participant selected the same age-appropriate target fund where she had had her 401k balance. Our intention had been to use the DOL calculator for all affected participants as it will be impossible to learn of the actual earnings for all impacted (they all did various things with their improper 401k distribution). My question is this: can we use actual earnings for the 1 participant described and the DOL calculator for the rest? Or do we need to use the DOL calculator for everyone so that we treat them the same? For the 1 participant described, if we forfeit her actual earnings in the 403b plan, the DOL calculator will result in less earnings applied to the principal when it is returned to the 401k plan. Thanks. Link to comment Share on other sites More sharing options...
Peter Gulia Posted July 14, 2021 Share Posted July 14, 2021 If you administer both plans and they use the same recordkeeper, why not undo what is mistakenly credited to the 403(b) plan and credit it to the 401(k) plan? Peter Gulia PC Fiduciary Guidance Counsel Philadelphia, Pennsylvania 215-732-1552 Peter@FiduciaryGuidanceCounsel.com Link to comment Share on other sites More sharing options...
waid10 Posted July 14, 2021 Author Share Posted July 14, 2021 1 hour ago, Peter Gulia said: If you administer both plans and they use the same recordkeeper, why not undo what is mistakenly credited to the 403(b) plan and credit it to the 401(k) plan? I think this is the basis of my question. Can we do as you say and treat this participant different than how we correct the others? Link to comment Share on other sites More sharing options...
Bob the Swimmer Posted July 15, 2021 Share Posted July 15, 2021 If you use actual earnings for the highest -performing fund for the period of time, that should work. Link to comment Share on other sites More sharing options...
waid10 Posted July 16, 2021 Author Share Posted July 16, 2021 14 hours ago, Bob the Swimmer said: If you use actual earnings for the highest -performing fund for the period of time, that should work. So are you saying that it is impermissible to do as Peter Gulia describes above (which is attempt to undue the error for the one participant and credit his 401k account with the amounts that mistakenly went into the 403b)? Link to comment Share on other sites More sharing options...
Bob the Swimmer Posted July 16, 2021 Share Posted July 16, 2021 I agree with most of what Peter said (and says) as he has great suggestions and advice---if anyone audits you (IRS or DOL) you'd have to show a reasonable process and document the results for the files. Link to comment Share on other sites More sharing options...
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