A Custodian incorrectly charged a 3% surrender fee on one particular fund to participants when the money was moved to a new custodian.
At a later date that money was refunded by the custodian.
The problem is that several participants affected by the surrender fee left, and the $ amount is pretty immaterial.

Q: Can the $ amount be allocated to participants in the plan based upon account balances and not to those who actually were charged the surrender fee?

Not legitimately, in my opinion. There may be a way to accomplish close to what you want though if you use EPCRS. I seem to recall that there are certain corrections one can make that involve ignoring a correction for any participant who would have a correction that is less than $20. But you have to satisfy a certain "pain" threshold in order to take advantage of this rule. That is, the plan would need to claim that it would endure too much pain if it attempted to correct completely. That seems like a hard threshold to meet, on its face. But, then again, maybe not.