In-service distribution to IRA

[goldtpa]

I have a situation which I hope everyone can help me with. Client starts a 401(k) in 2003. Contributes 12,000 to mutual fund A. Client not happy with broker, switches to a new broker. New Broker transfer the 12,000 into an existsing IRA. In 2004 client contributes 13,000. Broker moves employee deferral to the exsisting IRA, claiming the law allows for in service distributions. The Employee in question is the owner of the company and had no idea the new broker had done this. The plan does not allow for in-service distrbutions. Client is approx early 50's. The accounts of all the other employees in the 401(K) seem to be fine.

Can you move the money back to the 401(k), claiming it was a mistake??

Any thoughts on what to do???