Adjusted ADP test creates overpaid corrective distributions - what to do?

[MrsMacias]

A client provided a revised census for 2020 testing. When 2020 testing was rerun it was determined that the plan failed less than the original test. Corrective distributions had already been paid out and reported for 2021 taxes by the time the revised test was run. Participants are no longer able to return the excess corrective distributions to the plan. What is the correction? We are thinking that the client needs to submit the difference back to the plan but not the participant accounts. Is this correct?

[Bri]

Why can't they return the excess?

[MrsMacias]

They are legally able to however, the participants no longer have the funds to return. 

 

 

[Bri]

Ooh!  Is there profit sharing?  How about doing a QNEC to some HCEs in order to cause the actually-refunded amounts to be correct after all and see if you still pass 401a4?

(I'm not feeling well today.  Sorry.)

[BG5150]

Too late to do a QNEC, I think.

[Bri]

ooh, right, sorry - misread the year in question.  (Was dealing with reaction from booster shot)