Take Losses into Account in Earnings Calculation on Mistaken Deferrals

[Guest CMC]

I'm looking at a plan that failed to prohibit participants from making elective deferrals after they took hardship distributions. The mistaken deferrals incurred losses. If the plan kicks these deferrals back out, should the losses be taken into account in the earnings calculation? Rev. Proc. 2001-17, Section 6.02(4)(a) says that "the corrective allocation need not be adjusted for losses." Do others read this to mean that the plan has a choice as to whether to take losses into account? What have other plans done in this situation?