contribution after distribution?

[Guest jmlumpkin]

i have a client who distributed a participants account balance prior to the final matching contribution being deposited. under a 401k plan, i understand that it would be simple to deposit the contribution, then reprocess the distribution. however, the provider in this instance is indicating that they cannot simply reopen the account without collecting the initial distribution.

does this argument make sense to anyone? i apologize for my ignorance relative to 403(b) annuity contracts.

if it does make sense, what other option does the employer have in this instance? i assume they cant simply run it through payroll....

[mbozek]

Whose plan is this yours or the providers? If you need to make a corrective contribution then you should do so- the provider works for the plan not the other way around. The provider my be fixated on some some rule that they cant make a contribution because the employee is no longer a participant since the account balance has been paid (which would require a return of the balance) but this is no reason to refuse to allow a corrective contribution.

[401 Chaos]

I agree with Mbozek. We've made corrective contributions by "reopening" closed accounts with several large recordkeepers as part of larger EPCRS corrections and never had this issue.

[Appleby]

It could be based on some in-house rules, relating to minimum balance requirements and such…but still, I can’t see why they can’t make an exception, especially if the balance is paid out immediately after being credited…