Safe Harbor Plan

[MarZDoates]

Safe Harbor 401(k) plan had 401(a)(17) failure in 2011. Employer deposited too much matching contribution. Can't use the account balance reduction method, because 100% of the account participant's was paid out in accordance with a QDRO.

We know that a safe harbor plan can't be amended mid-year. Is there any exception to this in order to correct with a retro amendment and making an additional contribution for the other participants?

[ETA Consulting LLC]

You may not need an amendment for this potentially costly option. As it currently stands, if a participant received an amount they were not entitled to under the written terms of the plan, then you can retrieve those funds (or issue a corrected 1099-R) to show the excess portion was not eligible for rollover. You'd then only reimburse the plan for that amount. Any proposal to give all other employees the excess that was given to one participant would appear to be more costly than necessary.

Good Luck!