401(k) Deferral Correction

[MGOAdmin]

If for the past 2 years, a client has been making 401(k) deferral contributions on behalf of an employee on leave out of post-tax payments that are not allowed to be used for 401(k). The employee has no other income from the client to make 401(k), and therefore should not have contributed anything.

What is the correction method?

Are there multiple ways to correct?

Do you have to file anything with the IRS or can you self correct?

My experience with excess 401(k) contributions is to refund the money and earnings as ordinary income, but that was for contributions over the $17,500 limit. I am not sure if it is different if all of the 401(k) contributions are disallowed, and if it spans multiple years.