ADP corrective distributions too much

[DMcGovern]

Large 401(k) plan, ADP test failed and corrective distributions made to 124 HCEs. Subsequently it was discovered that a change in compensation and deferral amounts was needed to a few participants, including 2 HCEs. Once the test was re-run, this changed the results. Two additional HCEs now need refunds (no problem here), and 123 HCEs had been distributed too much. Most of them the excess amount distributed was about $65.

Does this need to be corrected?

[hr for me]

Years ago, I helped on a correction to nondiscrimination ADP/ACP refunds. I was able to argue de minimus overall in the total refunds (and I was in the place where it was much worse than this....that is HCEs were calculated wrong -- some got refunds they never should have and others who should have didn't) through the correction process and in the end did pay the penalties for filing but didn't in the end have to make the actual corrections. It took a while to do all the work and prove de minimus though. As the TPA, we ended up eating a large bill for my time that was then non-billable but in the end the client didn't have to redo W-2s or ask for $ back or do a second refund. So the client was not out any money.

If I remember correctly it was through EPCRS, under VCP as we hadn't been audited yet. This was back before there were general correction principles though.