Impermissable distribution

[BG5150]

Plan allowed a participant to have an in-service withdrawal before his time. (allowable at 2 years of accumulated funds or 5 YOP, but both only from 100% vested sources). participant was 80% vested at the time.

EPCRS seems to say that we could fix this by:

1) adopting retroactive amendment under VCP; or

2) have the employer take "reasonable steps to have the Overpayment...returned by the participant...to the plan."

For #2, what are reasonable steps? just write a letter? (BTW, the money was NOT rolled over)

Are there adverse consequences to the participant if he doesn't pay it back?

[PensionPro]

For current employees writing a letter may not be sufficient.

[BG5150]

What would be sufficient, then?

[12AX7]

Whatever "reasonable steps" are taken, and if they fail, is the only option to adopt the retroactive amendment? This seems to take the plan in an unintended direction.

How much money is involved? Can the participant repay the plan in installments or through deductions from payroll so that the entire amount is repaid within the plan year and not upset the reversal of possible 1099-R processing.

[BG5150]

What we came up with is this:

The person is now eligible for the distribution. it would be counter-productive to have the money replaced to just have it withdrawn again. We'll put a note in the file stating the position and move on.

[masteff]

Might I suggest:

We'll put a note in the file stating the position, noting steps taken to prevent the same error from recuring, and move on.

[BG5150]

Actually, that's in there, too.