Incorrect vesting applied

[Belgarath]

I've never seen this one -

Client had a document - non top heavy plan - that called for 7 year vesting. I haven't seen one of these in a long time! Anyway, prior TPA evidently did admin based upon 6 year graded. So, some terminated participants have received overpayments in the past, and some remaining participants received smaller forfeitures than they would have been entitled to under the terms of the plan.

I don't know the scope of this yet - # or % of participants, dollar amounts, etc. - assuming for the moment that this could be self-corrected under Rev. Proc. 2003-44, how would you correct it? Appendix B, .03 gives specific corrections for vesting failure situations where a participant receives too SMALL a distribution, but not the reverse. So, should this not be considered a vesting failure, but simply an overpayment, and be handled accordingly according to .05 of Appendix B (which in this case refers you to 2.04(2)(a)(iii)?) That's how I'd be inclined to handle, but thought I'd see if anyone has run into this before. Thanks.

[401 Chaos]

Belgarath (or others): We have a similar issue where a shorter vesting schedule was erroneously applied across the board and participants were told that they were fully vested. Just curious how others have handled these situations where the error involves "over-vesting" rather than "under-vesting?" Seems one approach may be to adopt a retroactive amendment with the erroneous vesting schedule being applied. Our case involves a relatively small plan with only a couple of participants (both NHCEs) actually impacted by the mistake.