Plan Liquidated but Fails Discrimination Testing

[FT Retire]

Just want to get some input on the following situation:

A plan has been terminated and assets have been liquidated as of 12/31/2022. I worked on the discrimination testing for the plan and it turns out the plan fails discrimination testing. I have recharacterized the affected participant's excess contributions as catch-up and it turns out the affected participant will need a refund distribution of less than $20. When the affected participant withdrew his funds, it was a cash distribution so it makes things a little easier. With that said, which are the best options:

1. Have the asset platform create an additional 1099-R to account for the excess contributions?

2. Leave it alone since the affected contributions will already be taxed since he took out a cash distribution

Would like to know your thoughts on this. 

[Lou S.]

It's address in the IRS instructions to Form 1099-R. I think the section called something like "Corrective distribution after total withdrawal". I'm pretty sure the correction is to issue amended 1099-Rs, one for the refund and one the balance of the distribution.