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How about the challenger presenting their support first? Why should we be always on the defensive?

You are close. Look at 1.402A-1 again. Q&A 5 says a distribution from a designated Roth account can be rolled directly into another designated Roth account. As you mention, Designated Roth account is defined in Q&A 1 as a separate account to which Roth deferrals are permitted to be made (and satisfies certain other requirements). If the plan doesn't allow Roth deferrals, it doesn't have a designated Roth account.

I agree with kcbrim the correction needs to put both people back to where they would have been if the error wasn't made. The person who got the funds in error should not receive any kind of windfall from the error. The person who got shorted in funds should not be subject to any kind of shortage. Back when I did daily valued 4k plans I would have been expected to figure out how many units where purchased in the person who got the money any dividends paid (and units bought with those dividends) and get them out of his account. I would then have been expected to compute how many units the other person should have gotten and any dividends they should have received (and units they would have purchased) and that would go into their account. This was based on their investment election and hopefully they didn't change during this time frame as that just made it more complex. If that resulted in too little money in the plan the firm that made the mistake had to add money. If there was too much money it got less clear who got that. That was the one time the person who got the deposit in error might get a windfall. I understand the point this is small and what I described might be costly in terms of time. Someone else can decide if it is worth it but that was always the expectation back in the day.

Since you are not sure, the best way would be to include language that is specific enough to make it clear what the initial entry dates are supposed to be. Our PPA VS documents have places for "other" provisions and special effective date sections that allow additional language for unusual situations. I would expect other documents to have the same types of options.

I think the common trend is for plans to actually require each employer to adopt on to the document as opposed to automatically covering them. But, you're right in that you should always compare what actually happened to the written terms of the plan when defining problems such as this. The fix is to file a VCP and have a retroactive Co-Sponsor Adoption of the Management Company (similar to a non-amender process). Again, it is only after you ascertain that the Management Company, Inc. was not included in the plan as recommended by kcbirm. Good Luck!

With respect to the prohibited transaction issue, the timing requirements relate to separation from the employer's assets and delivery to the trust. Credit to individual accounts is not involved. I will let others speak to the plan disqualification and contract issues (not administering the plan in accordance with its terms).

Agree with kcbirm. I would be curious if anyone can even come up with a scenario where a tax exempt trust/plan would pay a participant's taxes. Edited to add: if the policy is being liquidated and the value distributed, then there isn't a >distribution of insurance". It's just a distribution.

As they have no legitimate claim on the assets payable from the plan, no effort should be made to run them through the estate so the creditors can get a cut. As for the legitimacy of the lawyer trying to get the pension distributions run through the estate to beef up his or her fees, well, I am having trouble finding words suitable to express the contempt in which I hold such practices!

It is indeed obnoxious, ridiculous. asinine, and any of a number of other pejorative terms that you might care to employ. What is the point? Or to quote Basil Fawlty, "What is the bloody point?" I couldn't begin to imagine. I just know that's what the regs require. At a guess, and only a guess, this restriction only applies to custodial accounts because in the dim and distant past, 403(b) were annuities only, and so when this provision was instituted, annuity contracts were "grandfathered."