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As a general rule I don't respond substantively to posts that refer to an actuary as an actuarial.

"Long story short, the actuarial was unable to accurately anticipate the aggressive nature of our client's investing and currently has a nearly $1mm overfunding situation." This is my favorite line. Your client didn't listen to the actuary and it's the actuary's fault.

1.72(p)-1, Q&A 19(b)(2)

Well - it was the wild west back in the '90s for §403(b) arrangements. Looks like that section applied for plan years 1988 and later, and clarification came out in 1989 - so I'm guessing the document provider didn't restrict it. This paper is from 1995 - but explains the earlier history pretty well I think. https://www.irs.gov/pub/irs-tege/eotopici95.pdf "Prior to 1986, there were no nondiscrimination rules applicable to 403(b) plans. TRA '86 added separate nondiscrimination rules for non-salary reduction and salary reduction contributions under clauses (i) and (ii), respectively, of IRC 403(b)(12)(A). These rules generally must be satisfied in operation for plan years beginning after December 31, 1988. Pending the issuance of regulations or other guidance, Notice 89-23, 1989-1 C.B. 654 (extended by Notice 92-36, 1992-2 C.B. 364), provides guidance for complying with the nondiscrimination rules. Specifically, Notice 89-23 deems a 403(b) plan to satisfy nondiscrimination if either the employer operates the plan in accordance with a good faith, reasonable interpretation of section 403(b)(12) of the Code, or in accordance with the safe harbors set forth in the Notice. A. Salary Reduction Contributions Salary reduction contributions are tested separately for nondiscrimination under clause (ii) of IRC 403(b)(12)(A). Nondiscrimination with respect to salary reduction contributions generally is satisfied only if each employee may elect to defer more than $200 annually. Thus, for salary reduction contributions to a 403(b) plan, there is no nondiscrimination analysis of the amounts contributed. The test focuses on eligibility and generally requires universal eligibility. There is no requirement to offer the opportunity to make salary reduction contributions. Once that opportunity is offered to any employee, it must be offered to all employees in order to satisfy this requirement."

If the participant doesn't repay an improper distribution of his/her entire vested benefit, the participant's vested balance is now zero. The employer has to make a reasonable effort to get the employee to repay the distribution. If the participant does repay it, it goes back into his/her vested balance. If not, treat it as a distribution, revise procedures, document the self correction and move on. If the overpayment exceeds the participant's vested balance, then the employer would be on the hook to make a deposit if the participant doesn't repay the overpayment. What happens to the employer's payment depends on the situation. The easiest example is a terminated participant with a $10,000 balance with $8,000 vested, but receives a distribution of $10,000 and refuses to repay the overpayment. The employer (or someone else) would need to deposit $2,000 plus lost earnings, which would be used to replace the forfeitures that were supposed to result from the distribution. One of the goals of EPCRS is to put the plan back in the position it would have been in if the failure had not occurred.

Hmmm, maybe you could get there, with some gymnastics... First, if the employer made an HSA contribution to all HDHP participants, and then a 403(b) employer contribution to all those who are not HDHP, that should work to avoid the deemed CODA issues. (Use individual allocation groups for the 403(b) employer contribution.) If you exclude HCEs from the mix, then you don't have any discrimination testing issues. Then you could 457 the same dollar amount to all the excluded HCEs. That's not precisely what you asked for, but it's dang close!

You can't amend, since the 5500-EZ is not filed with the DOL. You would need to file under DFVCP.

Each set of facts is unique, but it is not unheard of, and not inconsistent with the guidance that Fiduciary Guidance Counsel cites above, for a plan sponsor who has received such a small check, after confirming that it cannot reasonably determine the identity of the participant or participants whose investments in the particular mutual fund or funds 15 years ago gave rise to the payment, to use the amount to pay plan expenses (assuming that plan has language permitting this), which benefits all current plan participants. You might, however, want to first assure yourself that this is the only check that will be received with respect to this fund family. Most likely, the settlement authority issuing the check knows only that the plan had an amount invested in the mutual funds in question, under the plan's EIN, and does not have the identities of the individual participants within the plan whose funds were invested in the offending funds.

Under Notice 2016-16, if it's not prohibited (i.e., if it is not one of the excluded categories of changes after the first paragraph of Section III(B), and not included in the list of prohibited changes in III(D), it's permissible. The proposed change appears to be covered by the general language of the first paragraph of Section III(B) of Notice 2016-16 as permissible. You would need to meet the notice requirements. There's also an argument that it's permissible under the regs, but that's more complicated and unnecessary given Notice 2016-16.

The provider is really irrelevant. It's a plan asset, and a plan problem. How much of an issue depends on the details. When was the original payment made, was there notice and consent or was it a forceout, were there taxs withheld, was it reported on a 5500, 1099, 945, 8955, etc... It should be deposited to the trust, he participant should be default enrolled, and payment process should start over (and other steps as necessary). If participant does not receive your payment, go to your missing participant procedures. I do not think that sending the check to the sponsor is reasonable as it should be handled on a plan level.