How to correct an overpayment, using EPCRS 2016-51

[AlbanyConsultant]

Is it just me, or is this one heck of a labyrinth to figure this out?  I've got a participant who was overpaid by about $1,000 in an individual account (i.e. on a platform) 401(k) plan (erroneous deposit combined with immediate distribution - every TPA's nightmare).

 

I started with Appendix B, Section 2.05 "Correction of Other Overpayment Failures".  That says that for a DC plan, I go to Appendix B, Section 2.04(2)(a)(iii).  Flipping back a few pages, I find that section is headed "Return of Overpayment Correction Method" and is generally talking about a 415(c) refund, but it directs me to Section 6.06(3).

 

6.06(3) is "Correction of Overpayment (defined benefit plans)" - !?!?  That's a little odd, since 6.06(4) is the same section for defined contribution & 403(b) plans.  I'm sure the IRS wouldn't make a typo, though, so I'll stick with 6.06(3).  This kicks me back to Appendix B, Section 2.04(1), keeping in mind that I might want to consider Section 4.05 (correction via plan amendment - no, I don't want that), and also keeping in mind that I don't violate Section 6.02 (general correction rules, like don't favor HCEs, etc.).

 

Appendix B, Section 2.04(1) talks about "Failures Relating to a 415(b) Excess".  Again, we're back to 415 violations, and the examples are all DB-esque.

 

This is the worst "Choose Your Own Adventure" book ever.

 

Can anyone help me make sense of this?  Or point me to something that makes the steps to correct this clearer?  Thanks!

[ESOP Guy]

I believe you are looking in the wrong part of the notice. 

https://www.irs.gov/pub/irs-drop/rp-16-51.pdf

On this pdf see page 31 for small overpayments (limit $100) so not your issue but I thought I would point it out. 

Then see page 37 for corrections overpayment DC and 403(b) plans.

[AlbanyConsultant]

Thank you.  I knew I had to be overcomplicating this...

[AlbanyConsultant]

Is it just me, or does the second sentence of 6.06(4)(a) not seem to be complete...?

Quote

Under this method, the employer takes reasonable steps to have the Overpayment,
adjusted for Earnings at the plan’s earnings rate from the date of the distribution to the
date of the correction of the Overpayment.

 

[ESOP Guy]

I do think the sentence would read better if it started this way:

Under this method, the employer takes reasonable steps to have the Overpayment corrected,