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Oh no, Mike, please say it ain't so!

I would think the plan should have language either permitting or not permitting a distribution of a rollover at any time - it can. If not, I think you'd have to assume it is not permitted. I see no advantage. I suspect it is just the way someone always did it, and suggested* that participants do so. *Actual practice might range from an open discussion of all options, to only giving that option, to just doing it and calling it a "rollover" when it really was more of an impermissible merger or something similar.

Prior thread: https://benefitslink.com/boards/index.php?/topic/50722-avoid-future-audit/

So, employees were given a separate election for bonus pay; with the default being "no election -no withholding". As long as that was properly communicated, there wouldn't be a problem. The default could've easily been "no election - regular payroll withholding", but that's not relevant. As long as each employee was given ample opportunity to elect to defer, then there is no issue. It would even be nice if the regular salary reduction agreement for payroll advised that this election is for regular payroll only. So, without actually looking at all the facts, you cannot really conclude there is a problem. Until you ascertain there is a problem, there's really no need to vet a solution. Good Luck!

So are you saying the reason you can't put the toothpaste back in the tube is that it's too messy or because it's dried up because the cap was left off for too long?

There are several discussions about unterminating a plan before commencing distributions. I don't think you can put the toothpaste back in the tube once you start paying out participants. Their option would be to pay out the remaining participant ASAP and start a plan 12 months thereafter. Or look at options that do not trigger successor plan rules such as ESOPs, DBs, SEPs, SIMPLEs, 403(b)s, 457(b)s.

"this letter says correct or else." New way to interpret the "V" in VFCP. Maybe is should be rebranded the Mandatory Fiduciary Compliance Program.

I could not agree more with all of the responses. This is a great forum for discussions/questions from User opinions that I respect (outside of my co-workers opinions).