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I rarely disagree by name but I disagree with Jpod on this one. Josh I agree you have every right to protect your interests. As such you should ask all the quesitons you need to determine you really were overpaid or not. But if you owe the plan money you should pay it. This is simply good ethics. I have been on both sides of this. I have made mistakes that have caused participants to be overpaid and underpaid. If I find a person is underpaid I work to get them paid. The reality is I could many times let ignorance be bliss tell no one I made a mistake and no one would know there was a mistake and an underpayment happened. I don't let it happen. I have made mistakes where a person was overpaid and was relieved when they agreed to repay the money that was a mistake. And yes you shouldn't have to pay taxes if the IRA returns the money to the plan via a trustee to trustee transfer.

Agree. You can't "start a new and separate SEP for employees other than owner" but can can use the "3 out of last 5" exclusion to keep the employee out.