returning a refund... or not

Short version: Participant A requires a 415 refund every year, and the participant and/or plan sponsor don't change anything, so it keeps happening, so we do a distribution each Fall.  For 2022, we processed a refund in November 2023, but in January 2024 A called to say that the refund didn't reach her.  After some panic, it was re-processed in January 2024.  The refund for 2023 was processed November 2024, no problem.  Now upon further discussion, A realizes that she did get the distribution in November 2023, so she got it twice.  A is 49 years old, not eligible for any in-service withdrawal from the plan.

So step one will be to try to get A to return one of the distributions ($11K).  But she's already got a 1099R for it, and getting a recordkeeper to change it is going to be nigh-impossible.  So, really, what is A's incentive to return the money?  She's paid the taxes on it; if she returns the money, it gets taxed again on the way out?  I suppose we could try to set up an after-tax source at the rk, but... still, why would A want to return the money?

For the plan sponsor, they have to ask for the money back.  And if A doesn't return it...?  Document the process, multiple requests, but ultimately they can't really DO anything if she doesn't return the money, as far as I can tell.

What am I overlooking?  Thanks.

If the plan wishes to approach the issue an overpayment, here is an excellent article about how to recoup overpayments after SECURE 2.0:

https://www.mercer.com/insights/law-and-policy/correcting-retirement-plan-overpayments-under-secure-2-0/

Given the size of the extra payment ($11K), the plan should consider making an attempt to get the money back.

Regarding the 1099R, it can be corrected by filing a corrected 1099R (basically void the original and providing a replacement.  The participant would then file an amended 1040X to recoup the taxes.  This is not as onerous for the participant as it may seem.  Here some guidance with some greater detail on how this would flow:

https://www.irs.gov/taxtopics/tc154

The rationale as to why the participant may want to do this is the same rationale the participant should have for her contributions - accumulating assets for retirement.  She would not be double-taxed on the amounts returned to the plan, and there would be no need for the plan to set up an after-tax amount.

The whole situation does beg the question why no one checked the trust to see if the first refund was cashed before issuing another check, or if someone did check the trust, why the second check was written.  If the check was cashed but not credited to her account, it seems there may be an issue with reconciling trust assets to participant accounts that is worth investigating.

Thanks for the suggestions.

I've tended to read the "overpayment" rules as applying to DB plans, not DC plans.  Guess that's just a me thing.

Believe me, I'm definitely looking into how this got done twice with no one confirming the status of the first payment!