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Take a look at Rev. Proc. 2021-30. I recall there was something about overpayments under $250.

Every pension actuary (and Plan Administrator) has worried about this since RMDs became a thing. To date, there is no consensus. (I'm mostly retired, so it's possible my info is out-of-date.) This problem has a corollary: what do we do now to minimize the problem later? My recommendation is to "put the fear of God" into them as they are walking out the door; ie, remind them that (1) keep the paperwork that we give you because it means you have a deferred benefit and there might be a surviving spouse benefit, and (2) it is your responsibility to keep us informed of your mailing address, and (3) you will be taxed on the benefit at NRD even if you don't start receiving it. @Carol V. Calhoun, I don't pretend this is foolproof, but I have seen some HR departments recognize that it helps. Having the sponsor's attorney reinforce the actuary's suggestion might also be helpful.

Doesn't specifically help here but the current legislation being considered will give plan sponsors leeway to not recoup overpayments. Congressional sentiment seems to be that participants should have to cough up corrections to plan sponsor's (or their providers') mistakes, although the context of that is more in the repayment of years of excess pension payments rather than a $30 lump sum excess. Personal opinion - $30 is immaterial to plan, neither the plan itself nor any participant was harmed as the excess $30 should never have been in there to begin with, so just move on. They could ask for it back, make the plan whole by depositing the $30 from the former participant or the employer, forfeit the incorrect/errant contribution and maybe return to employer (mistake of fact mentioned above) or reduce a future contribution - that's a big circle of professional time costing way more than $30 to get everyone where they already are (except maybe the payee has $30 less). Sometimes practicality and (im)materiality needs to win out over strict legality.

My layman's opinion - I'd think the 401(a)(9) requires the PA to issue checks regardless of an election. I also think payments have not been pursuant to the participant's affirmative election, so he could make a formal election for "the rest of his benefits" at any subsequent time in his preferred form. And the plan issues a 1099-R for the checks written, even if they remain uncashed and show up on the balance sheet as a payable. The participant might need to cash a couple of those checks to cover the taxes due.

I don’t advise anyone here. Some fiduciaries might include in one’s reasoning: If the plan’s administrator can do so without incurring an incremental expense, the administrator might send a demand letter asking the distributee to restore to the plan the overpaid amount. If the plan’s trust collects a restored amount, the plan’s administrator might evaluate whether the employer had paid an amount to the plan under a mistake of fact and, if so, whether an amount (adjusted regarding loss or income) must or may be returned to the employer. See ERISA § 403(c)(2)(A)(i) and the governing documents’ provision. Assuming customary provisions in the plan’s governing documents, a fiduciary might evaluate that it need not sue the distributee for a restoration of the overpaid amount if the fiduciary prudently finds that the value of the claim—discounted by the probability of getting the court’s judgment, and further discounted by the probability of collecting a judgment—is less than the court’s filing fee and the fees and expenses for the plan’s attorneys and their assistants. Whatever is or isn’t done to correct this error, one hopes a plan’s independent qualified public accountant would see that the error is not material, and not even significant, in the plan’s financial statements.

Peter, we do it automatically as part of the participant statements that we provide. The calculations are built into our admin software, so it's not a big deal.

If the disability plan is fully insured, Guardian issues a W-2 and makes the tax deposits using their tax ID #. If the plan is self-funded, the W-2 is issued by the employer.

There is what's required, and then there is what's wise. Send them some type of notice.