I have discovered that a client of mine has reverted plan assets back to the employer. They claim that they "overfunded" the plan by estimating contributions throughout the year. After year-end, they simply write a check from the plan to the employer. Is this truly a prohibited transaction and if so, does it come with a 50% excise tax? Should they attempt to correct by putting those assets back into the plan? That would seem to compound the problem, but who knows? I would like to help put this client on the straight and narrow, but also minimize the correction costs. Please help!

This plan sponsor is in need of some very strong advice from his ERISA attorney!