Ineligible 401(k) participant

An employer allowed an employee to begin deferring in 2017, but they are not eligible until 2018.  The employer does not want to use the EPCRS amendment correction method so that the participant would be eligible for 2017, since they would be required to provide a top heavy minimum allocation.  If the early deferrals plus gain/loss are returned to the participant, what 1099 code should be used? It seems like it should be a 2017 tax event.

Code E should work.  I'd even have it taxable in 2018 since this is the year of distribution.

Good Luck!