Eliminating 4972 Excise Tax in 401(k) Plan

[Guest OHH]

I have a 401(k) Plan with household workers and we wanted to terminate the 401(k) Plan and distribute the nondeductible contributions and allow them to roll them over into a SIMPLE IRA to avoid the 4972 10% excise tax in 2003 and beyond. The 4972 excise tax is a cummulative excise tax and the Code, which was changed in 1986, reads that if the contributions are returned to the Employer, then there is no excise tax. Pre-1986, the Code stated that a correcting distribution may be made to avoid the excise tax. My question is: does distributing the nondeductible contributions in 2002 avoid the cummulative excise tax in 2003 and beyond? Or are we required to return the 2002 contributions to the Employer to avoid the cummulative excise tax? Also, does the termination of the 401(k) Plan cause the excise tax to cease in 2003 and beyond?