ADP test failure

Hi, 

One of the terminated plans failed their ADP test since all participants have moved their money how can the correction be done? can they just have the tax record corrected or should employee return the excess amount to the plan. 

Is the question "One of the terminated plans failed their ADP.  Since all participants have moved their money how can the correction be done?"

If so, ugh.....   Technically, I don't know if the money has to be returned to the plan to issue ADP refunds.  However, the tax records have to be corrected.   Hopefully the distributions happened in 2024?

17 minutes ago, Mr Bagwell said:

Is the question "One of the terminated plans failed their ADP.  Since all participants have moved their money how can the correction be done?"

If so, ugh.....   Technically, I don't know if the money has to be returned to the plan to issue ADP refunds.  However, the tax records have to be corrected.   Hopefully the distributions happened in 2024?

That is correct the plan is terminated.  and the distribution occurred in 2023. 

The funds were distributed, which they should have been, regardless if they were an actual benefit payment, or as an ADP refund.

The plan just has to do two 1099-R forms bifurcating how much counts as what, and then since the IRA has money it shouldn't in there, the IRA owner will need to get it out or face the penalty for an ineligible rollover contribution.

32 minutes ago, Bri said:

The funds were distributed, which they should have been, regardless if they were an actual benefit payment, or as an ADP refund.

The plan just has to do two 1099-R forms bifurcating how much counts as what, and then since the IRA has money it shouldn't in there, the IRA owner will need to get it out or face the penalty for an ineligible rollover contribution.

Thank you!