Employee took a hardship withdrawal under the safe harbor rules in December of 2001. The employer did not stop 401(k) withholding until the second week of January. Total 401(k) deposit for the 5 weeks about $100.00
The fact that the employer didnot stop withholding immediately upon the withdrawal is a violation of the safe harbor rules but it was short term and stoped as soon as discovered.---
Do I need to give the $100 back as an corrective distribution??
Or can we go on the basis that he was shut off for 6 months even though it started a month late?
What do you think??