Excess match - distributed

[kymo]

An employer deposited, erroneously, 2016 matching contributions into a number of employee accounts.  The mistake was discovered in January 2017; adjustments can be made to accounts; no problem.  But some employees have left and taken a distribution.  What duty does the employer have to seek repayment to the 401(k) trust?  Does employer have duty to notify the employee? To advise that the mistaken match isn't eligible for rollover and if not repaid a 1099 will have to be issued (or maybe just recharacterize as additional company non-matching contributions (all employees affected are nhce's as well as collectively bargained)?

Any insight is appreciated.

[K2]

You might want to review this:  https://www.irs.gov/pub/irs-drop/rp-16-51.pdf 

If the amount is small, under $100, you don't have to seek recoupment nor notify the employee that the amount is ineligible for rollover.  Over that, you try and get the money back and you reissue the 1099 showing the ineligible amount.