Improper Distribution by the owner

[Blinky the 3-eyed Fish]

The 50% owner of the corporation that sponsors a 401(k) plan takes an in-service distribution of 401(k) source dollars without any sort of forms and contrary to the terms of the document. He is about 45 years old. Obviously, this is a no-no for many reasons, so does anyone know if there is some specific guidance regarding correcting this problem? Self-correction would be preferred. I tried reviewing Rev Proc. 2002-47, but didn't locate anything.

If no specific guidance is available, I am taking opinions on how to correct this.

[QDROphile]

I am not surprised that you did not find a section that covers in-service withdrawals by 45 year-old 50% owners, but the Rev. Proc. states principles of correction and does cover improper distributions. If there were specific guidance, I would not expect to find it anywhere but the Rev. Proc., unless you are looking for unofficial guidance, like in the Benefitslink Q&A column.

You should also consider whether a breach of fiduciary duty or prohibited transaction occurred.