Failed ADP TEST - HCE who is due refund is terminated and rollover $$$ over

[Pammie57]

I have a client who sold off part of their business during the plan/calendar year. Several HCE's were part of the sale and got distributions of 100% of their account. One of them rolled his $$$$$$ to an IRA. The 1099R's were prepared and sent by the platform they are invested in.

The plan failed the ADP test....refunds were due to one of the terminated HCE's.

I researched and found that he should have gotten two 1099R's - one coded for the corrective distribution as an 8 and one for the amount eligible for rollover. He originally only received one 1099R in January. This is an issue because who does ADP tests mid-year as a rule?

Other than corrected 1099 R's - what type of correspondence is the plan sponsor/plan platform/TPA responsible for sending to the terminated participant? is there a standard letter, notice. I assume this should come from the platform, but I found the issue....we are the TPA but have no control over funds.

Sorry for typo in title of topic.....

[Lou S.]

Corrected 1099-R.

Letter to the participant. In my experience the platform will not issue any such letter. Legally it is the Plan Administrator who is required to send the letter, the reality is this will often fall to the TPA to at least draft the letter that is to be sent.