ACP failure, refund to participant, losses, 1099-R

I need to be sure that my thinking is correct on this situation:

Plan fails 2021 ACP test.  A refund of match is made to the HCE in February 2022.  Participant account lost money for the 2021 plan year.  Refund to HCE is made timely and net of losses.  Well known national 401k vendor prepares 2022 1099-R form, boxes 1 and 2a are the same amount and equal the gross amount of the refund and not the net amount that the participant received after losses.  

Is that the correct way to do the 1099-R form?  For example, I always understood that had there been earnings on the account, the participant would have received a 1099-R form for the gross distribution (including gains) as long as it was timely distributed.

Therefore if there are losses on a timely distributed refund, the 1099-R form should reflect the actual distribution amount after the losses are applied.

Am I incorrect or missing something - or was this 1099-R improperly prepared?

TIA for any comments. 

The 1099-R for an ADP or ACP refund should be the net amount after reflecting the loss.

I think you get a different result if it is a 402(g) refund but I'd need to go back an review since it's been a while since we've had a 402(g) refund with a loss.

Thanks Lou - that was my thinking as well.

See the instructions for the Form 1099R:

"Losses. If a corrective distribution of an excess deferral is
made in a year after the year of deferral and a net loss has
been allocated to the excess deferral, report the corrective
distribution amount in boxes 1 and 2a of Form 1099-R for the
year of the distribution with the appropriate distribution code
in box 7. If the excess deferrals consist of designated Roth
contributions, report the corrective distribution amount in
box 1, 0 (zero) in box 2a, and the appropriate distribution
code in box 7. However, taxpayers must include the total
amount of the excess deferral (unadjusted for loss) in income
in the year of deferral, and they may report a loss on the tax
return for the year the corrective distribution is made."

18 minutes ago, Paul I said:

See the instructions for the Form 1099R:

"Losses. If a corrective distribution of an excess deferral is
made in a year after the year of deferral and a net loss has
been allocated to the excess deferral, report the corrective
distribution amount in boxes 1 and 2a of Form 1099-R for the
year of the distribution with the appropriate distribution code
in box 7. If the excess deferrals consist of designated Roth
contributions, report the corrective distribution amount in
box 1, 0 (zero) in box 2a, and the appropriate distribution
code in box 7. However, taxpayers must include the total
amount of the excess deferral (unadjusted for loss) in income
in the year of deferral, and they may report a loss on the tax
return for the year the corrective distribution is made."

Excess Deferral = 402(g) refund.

Excess Contribution = ADP refund

Excess Aggregate Contribution = ACP refund.

With an excess deferral the amount over the 402(g) limit is taxable in the year deferred but the gain/loss is taxable in the year received.

With an excess contribution or excess aggregate contribution both the refund and the gain/(loss) are taxable in the year received.