What happens if a plan sponsor accidently over paid $1,000 on participant distributions (That is the combined overpayment on about 5 accounts)?

How do you correct this?

Do they just make an additional $1,000 deposit to make the cash account whole? Any ideas?

Profit Sharing Plan Only:

What happens if a plan sponsor accidently over paid $1,000 on participant distributions (That is the combined overpayment on about 5 accounts)?

How do you correct this?

Do they just make an additional $1,000 deposit to make the cash account whole? Any ideas?

Several prior discussion. The Search function is recommended.
For example, http://benefitslink.com/boards/index.php?showtopic=36712

The plan sponsor does not want to go after the participants for the over paid money, then what?

If the overpayments were rolled over, he needs to notify the participants that the excess is not eligible for rollover. If he is not able (or doesn't want to) collect the overpaid funds, he must make the plan whole.

Send the participants a letter saying that a mistake was made. Quote ERISA and plan document rule that says a P's distribution can only be the amount of his accrued benefit -- ie, anything more is a violation of federal law. Ask for repayment. Sometimes, if the amount is very large, I've worked with Ps to spread out their repayments over several months or a year. Here, it's just $1,000. If they've rolled the funds to an IRA, I agree the Ps need to be informed that a portion of the amount rolled was ineligible for rollover. I think there's a rule in 408 or the 408 Regs to address the unwinding of an invalid rollover and providing a deadline for doing so (something like the April 15th of the year after the year of the overpayment). By the way, in some cases, I've also included a sentence saying that if the P incurs any additional tax planning expenses (paying an accountant to re-do 1040s, for example), that the company will reimburse those reasonable expenses. You should also be aware of the general fiduciary rules that apply here (see 1977 DOL rulings) and the IRS guidance (a notice or rev. rul. from @2003, I think) that describes tax issues related to a plan's recoupment of overpayments.
Finally, since this is a DC plan, I'm a little puzzled as to how they were overpaid from their accounts (but perhaps they were paid amounts that weren't yet vested, I suppose).

See the EPCRS (Employee Plans Compliance Resolution System) in Rev Proc 2006-27