IRC 415(k)(4) error -- can this be corrected?

[Guest Mr. Kite]

Client is a closely held corporation with a 401(k); one participant (a 60% owner) also participates in a 403(b) plan with a different employer (501©(3)). Under IRC 415(k)(4), the 403(b) and 401(k) are aggregated for applying the 415© limit, and we are now finding that the limit was blown for years up to and including 2007. The 415(k) rules provide that when there is an excess amount in this circumstance, the excess is treated as a disqualified 403(b) contribution, and the annuity contract must be bifurcated between taxable and nontaxable portions.

My first question is -- does this constitute a failure of the 401(k) plan, of the 403(b) plan, or both? Since the 415(k)(4) rules seem to treat the excess as nonqualified 403(b) contributions, is the corporation the proper party to request a correction?

If the corporation is NOT the appropriate party, does the 501©(3) have to seek a correction? The annuity provider? The employee?

If the corporation is the appropriate party, can corrective distributions be made (since the 415(k)(4) regs don't seem to permit distributions under these circumstances, probably because 415© failure is not a 403(b) distributable event).

Any help would be greatly appreciated.