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Ineligible Participant with Contributions and Investment


FishOn

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We have a plan where the plan sponsor/trustee made a contribution on behalf of his daughter who is neither employed or received compensation from the plan sponsor. She is ineligible.  He then moved the contribution to a plan checking account and invested the money in a short term real estate loan along with his money.  The real estate loan/note is not a party-in-interest. 
 
What are the proper steps to correct this?
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Forfeit the money (along with earnings), allocate to participants as an employer contribution or reduce employer contributions per the Plan document.

It's a little unclear to me who the owner of the real estate note is. Plan holding account? Plan Pooled Account? FBO account of owner?

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