Employee contributions made to wrong Plan

[MARYMM]

Employer has 401(k) and 403(b) Plans. Same investment options in both. Per diem employees are excluded from participating in the (k) Plan. When an employee's status changed to per diem in the spring of this year, employer did not discontinue (k) contributions . Also didn't advise employee that they could continue deferrals but to the 403(b) now (same investments but no employer match).

Is it OK to fix this as follows ? :

Recordkeeper removes deferrals (say, $5000) and match from participant account in (k) Plan and puts in Forfeitures.

Employer has employee execute salary deferral election for 403(b) Plan

Employer corrects payroll records to reflect that deductions are for 403(b) not 401(k) so W2 will be correct

Employer sends $5000 to 403(b)Plan for deferrals

I think the alternative is for the recordkeeper to return the deferrals to the employee who then has increased taxable income and may not have enough earnings for the remainder of the year to be able to defer that $5000

Thanks !

[MARYMM]

Employer has 401(k) and 403(b) Plans. Same investment options in both. Per diem employees are excluded from participating in the (k) Plan. When an employee's status changed to per diem in the spring of this year, employer did not discontinue (k) contributions . Also didn't advise employee that they could continue deferrals but to the 403(b) now (same investments but no employer match).

Is it OK to fix this as follows ? :

Recordkeeper removes deferrals (say, $5000) and match from participant account in (k) Plan and puts in Forfeitures.

Employer has employee execute salary deferral election for 403(b) Plan

Employer corrects payroll records to reflect that deductions are for 403(b) not 401(k) so W2 will be correct

Employer sends $5000 to 403(b)Plan for deferrals

I think the alternative is for the recordkeeper to return the deferrals to the employee who then has increased taxable income and may not have enough earnings for the remainder of the year to be able to defer that $5000

Thanks !

I overlooked gains/losses in this scenario.

Any takers on this ? Thanks.