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Why is the second plan at risk rather than the first? The first plan made an improper in-service distribution. What failure occurred with respect to the second plan? I would be tempted to ask the IRS to approve a transfer from the IRA to the second plan, with whatever restrictions would apply to the transferred amounts as if the transfer had been from the first plan. For example, the transferred amounts would be subject to the 401(k) in-service distribution rules, not the distribution rules for rollovers. The effect would be the same as if there had been a plan merger as of the date of the original distribution. That would make the Form 5500 correction rather strightforward if the second 401(k) plan had an effective date no later than the original distribution date.

I think austin wrote something but it was too small to read!

A pirate with a wooden leg wanted to buy fire insurance for his peg leg. The first actuary quoted an annual premium of $500, estimating that the leg would burn once in 20 years and the value of the leg is $10,000. The second actuary quoted an annual premium of $50. When the second actuary was asked how he arrived at such a small figure, he replied, "I have this situation in the fire schedule rating table. The object is a wooden structure with an upper sprinkler, isn´t it?"