improper distribution

[Guest kurt johansen]

I'm trying to determine the appropriate correction technique for an improper distribution. In my case, the employer treated employees as terminating employment when they were transferred to another division/classification that was not eligible to participate in plan. There does not seem to be any doubt that these participates did not have a true termination of employment and therefore, should not have received a distribution. Does anyone know what the proper correction technique would be? I'm sure we can start by requesting the participants to return the distribution with interest perhaps. However, I suspect that many of them may refuse. If so, then what can the plan sponsor do? Sue the participant? I think I read somewhere that the IRS has treated the plan as being disqualified as to the participants who don't return the distribution.

Kurt