ADP/ACP failure late correction - 1099 year?

[WCC]

A plan discovered a significant error from plan years ending December 31, 2012, 2013 and 2014. The plan submitted a VCP application and it was approved. Part of the correction is to fix the ADP failures. The plan was not tested correctly and refunds were never processed. Every participant needing a refund has taken their money and rolled it to an IRA. In which year should the 1099 for the excess amount be coded? Is a corrected 1099 sent to the participants for 2012, 2013, 2014 respectively?

Thank you

[ETA Consulting LLC]

I'm thinking that part of the VCP process is to explain to the IRS how you plan to locate and notify former participants.  How was that question answered?

I normally don't answer a question with a question, but it seems as if the approach you're seeking should've been submitted under that VCP application that was approved.

Good Luck!

[WCC]

Thank you, I will ask the attorney's who filed the VCP if they addressed this.

[Luke Bailey]

I think if you had folks who still had accounts, and so distributed the excess amounts now, with earnings, you would of course report on 1099-R and there's acode you use to show it is a correction amount and not subject to 10% penalty or eligible for rollover. For the folks who have already taken the money, you do not issue a 1099-R CORRECTED, but rather you need to send them letters telling them that the portion of what they previously received that was excess did not qualify for rollover and should be withdrawn from any IRA or plan they rolled to. See Section 6.06(1) of Rev. Proc. 2018-52.