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Agree with your suggested solution but also strongly suggest some formal legal guidance which could also ascertain risk. I would not "cheap out" given the size of the assets. Other key thoughts: who made the mistake, when did it occur, when was it discovered, and how soon thereafter was it corrected? Was this one big errant transfer or a series of errant transfers? Were they caused by honest clerical errors or was someone asleep at the wheel not paying attention. Was this the plan sponsor's doing or a third party? Documenting all that and fixing ASAP at a minimum is what I would suggest - put the plans where they'd be had the mistake(s) not occurred. Maybe a VFCP filing would be appropriate. My only formal advice here - get qualified legal guidance.

If a participant specifies a 100%-of-pay elective deferral, many employers and plan administrators interpret a plan to restrain such a deferral to what’s available after required withholding. Here’s a simplified illustration, assuming no tax beyond Federal taxes, and assuming nothing else taken from the worker’s pay: Pay before any withholding $10,000 Withholding for OASDI tax $620 Withholding for HI tax $145 Net pay after withholding for wage taxes $9,235 Federal income tax withholding (22% x $765) $168.30 Pay available for elective deferral $9,066.70 Elective deferral $9,066.70 Net pay $0.00 I’m not aware of a particular statutory authority. Some might follow a principle that what otherwise would be a contract promise or obligation that would require a person to disobey applicable public law is legally unenforceable. This is not advice to anyone.

Thank you for the response. Yes, the contributing employer is a government al agency, but the Trust was created by various labor organizations for participation by represented employees. I think the fact that the labor organizations created the trust would make the trust subject to ERISA.

Peter, you are not overlooking anything. Plans are designed to gather information beforehand about participants and money coming into the plan. This is not built into the Saver's Match design. There is a significant mismatch between how retirement plans are administered and how tax "refunds" (read money paid from the Treasury to an individual) are administered. The simplest way to characterize a recordkeeper taking on administering Saver's Match account is trying to pound a square peg into a round hole. The SPARK comment letter's great detail about the mechanics of moving the money around is just one example of the issues a recordkeeper will face.

Check the BPD - it should say that for a self-employed individual their compensation is their net earned income from self-employment, so whatever AA option gets checked I don't think it matters much.