minimal underpmt of 401(k), but participant already termed & distributed

Upon review, it was determined a participant's 401(k) that was withheld from his paycheck in the amount of $35 was not deposited. Participant has since terminated over a year ago and took a full distribution. Recordkeeper refuses to reopen the account without new enrollment paperwork.

Thinking to have the amount deposited to the Forfeiture account and be done with it.

By the way, in terms of delinquent contributions, this is the only amount.

FWIW, I would look to find a new RK. 

Um, no.  This was a deferral that the participant had deducted from their paycheck.  It's THEIR money!

So now it's a late deposit and they are owed earnings.

Tell the R/K this is a plan correction and they MUST re-open the account.  Are these brokerage accounts?

It's a standard recordkeeper, not a brokerage account.

Ultimately, participant will never get that $35 due to distribution fees which will end up going to the recordkeeper themselves.

If the $35 was not deposited, then the employer still has the deferral.  If funding the plan and lost earnings would result in the recordkeeper pocketing the amount funded as a payment processing fee, then the former participant still loses.

The company should not keep the $35.  They could consider writing a check to the former participant for the $35 plus lost earnings plus a gross up for taxes, and report it on a 1099-MISC.  If the former participant did not rollover their distribution, then they are kept whole plus a little bit.  If the former participant did rollover their distribution to an IRA, they may be able to make a contribution to the IRA, and they are kept whole plus a little bit more.

Document the whole transaction and I cannot imagine any agent or investigator having a problem with it.

Paul - thanks, and i do recognize this is a message board, not formally legal advice.

my other idea up top was to put it right into forfeiture account to reflect formally going into the plan.