We have a SH PS 401k plan that only allows for distributions after termination, retirement, disability. Each participant has a self-directed account with a large brokerage company.
One of the participants (still employed) called the broker directly and asked for an $800 distribution from her account. The broker made the distribution directly to the participant without asking for the Trustee to sign any papers. No taxes were withheld.
I found this distribution the following month when I was reconciling the monthly brokerage statements. The Trustee of the plan was furious that the broker made this distribution without any authorization.
The broker has now agreed that his company will give $800 back to the plan since it was their mistake. The broker is wanting to put the $800 into an unallocated PS account. My position is that the $800 should go back into the participant's account to make it whole since she wasn't eligible for a distribution.
Needless to say, this has caused turmoil among the other participants in this plan.
Should this be handled in a different manner?