Overpayments and Other Plan Errors

Good Morning.  Participant received an overpayment from his account.  It was from his vested account, but it was an impermissible distribution due to his age.  Attempts have been made to get the funds back from the participant, but he claims to not have the ability to repay.  I understand from reading the appropriate sections of EPCRS that the Plan Sponsor or another person must contribute the amount back to the plan.  I know in some cases, another person is a person acting on behalf of the Plan Sponsor.  My question is - who is another person in this case?  The TPA has offered to make the plan whole as they were the one that approved the distribution.  Can the TPA cut a check to the Plan for the overpayment plus earnings? Is there ever an issue with the TPA or recordkeeper correcting an operational failure where the correction method is making the plan whole (assuming the TPA and/or recordkeeper clearly caused the error). 

The requirement you are referring to was changed by Rev. Proc. 2015-27.  There is a current discussion on the same topic here:

For a correction where there is a required deposit amount, "another person" would be anyone willing to make the deposit. I would normally expect that to be the firm that caused the failure. I don't think the IRS cares who writes the check as long as the correction is done. 

Thanks Kevin C

Another question I have is do they pay back the amount to the participant that received the overpayment? If not, to whom? It seems as though the participant receives a windfall.

Employer does not pay the overpayment to participant’s account (assuming the full or partial amount of the overpayment was not received back from the participant).  It would be paid to the plan and used for future contributions, administrative expenses, etc. 

If the amount distributed incorrectly was paid from the participant's vested balance, the employer is not required to repay the distribution as part of the correction.  The other discussion linked above has more details.