What to do with terminated plan excess contributions that were mistake

[Guest Plan the Man]

:confused: :confused:

Please help....

Excess contributions were rolled over from a terminated qualified plan along with the rest of the assets to a 401(k). Recently (July 2002), it has been discovered that there were excess matching contributions to 4 employees in 1999 and 2000. I've investigated the matter and found that it qualifies as a insignificant operational failure that can be corrected by a SCP.

The main problem : These excess contributions never should have been rolled over from the old terminated plan to the new 401(k). Therefore, they must be rolled back to the old terminated plan. What can the employer do with this money so that the old plan is not disqualified (and thus would immediately tax all the rollovers) and what would be its tax treatment (i.e. 1099 forms, etc.)?

We greatly appreciate any help in this matter!

P.S.: The organization is privately owned.