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Perhaps you are overthinking it. A FORMER employee paid a premium - this is not a tax deferred event. How would you normally handle it with an identically situated departing employee when you do have adequate notice of their termination? Do you withhold balance-of-the month premiums from final pay, pre-tax? If so, I suppose you could have the employee pay back his final pay and reverse the payroll transaction, then re-run the final paycheck to withhold the premium. Puts everyone in the same position as if you had had proper notice of his termination. Seems like way too much trouble unless the former ee is putting up a big stink about the taxability issue. We have lots of situations where employees and former employees write a check to self-pay their health benefits. It's always with their post-tax dollars and will never impact W-2 reporting.

These sorts of errors happen all the time with 401(k) plans. Unless there is some funny business with respect to moving deductible amounts between fiscal years the IRS will allow just about anything that seems remotely reasonable as a self-correction. I dare say that every 401(k) plan in the country would be disqualified if the IRS were sticklers on the "don't contribute deferrals before the actuall payroll date" rules.