Incorrect Corrective Distribution Amount

Hi, we have a participant who made deferrals with 2 different plans (one of which we administer) in 2021. He contributed to Plan A (we do not administer this plan) in the first half of 2021 (until he left that company) and to Plan B (the plan we administer) in the second half of 2021. The participant is under the age of 50, so not catch up eligible.

About a month ago, he contacted us and told us that he exceeded the 402(g) limit between the 2 plans and sent us a statement from Plan A showing that he contributed $9,500 with Plan A. He contributed $12,000 with Plan B, so his total deferrals for 2021 were $21,500 (so $2,000 over the limit). We processed the corrective distribution for $2,000 (plus gains/losses).

He contacted us a few days ago saying that the statement he sent us from Plan A was incorrect. The correct contribution with Plan A (he also sent us W-2 to confirm) was actually $8,500 (not $9,500). So, the participant was actually $1,000 over the limit (not $2,000). He already cashed the corrective distribution check.

What would be the best course of action to correct this issue?

Thank you.

I think it's an overpayment under the terms of the plan and should be repaid. I do not see a reason the plan cannot and should not accept a check for $1,000 + earnings as repayment. Just be sure to document everything and make sure whoever is responsible for 1099 reporting has all facts as well.