Correcting Excess Distributions

[Guest Thornton]

We administer a plan where the sponsor has been over reporting hours for at least the last 5 years. Many participants who did not work 1,000 hours were reported as doing so, and incorrectly given a year of vesting service. About 30 terminated participants are involved with total overpayments of $8,000. Of course, these funds should have been allocated as forfeitures.

Total plan assets exceed $1,000,000,

so no single person is significantly impacted. Short of trying to collect small sums from all the overpaid former participants, what corredctive action would be appropriate? Would all the prior years need to be re-allocated if the employer deposits the funds? All ideas welcome!