In a takeover situation, how would you "withdraw" a contribution that should have been made to the qualified PS Plan and was by error deposited in an inactive SEP? This was an accounting error, essentially, due to confusion on accounts. Deposit was made in 1997 for a 7/31/97 Plan Year. Thanks for all input...

The SEP money has been in the employees' IRAs since then?

To clarify - all the $$ went to just 1 SEP - which was set up years ago for one of the HCEs.

If the error was the depositing institutions they may (or may not)coreect it and all of the paperwork. Assuming SEP contributions are not being made for other eligible employess, then the excess should be included o the W-2 form (or treated as EI is self-employed) and remnoved as an excess contribution under the IRA rules. The amount cannot be transferred from the SEP to the QP (it must be contributed by E/er to be deductible).