Are corrective distributions and the leveling method used for the same purpose?

The correct response highlights that corrective distributions and the leveling method serve distinct purposes within the framework of retirement plan administration.

Corrective distributions are typically utilized to rectify errors in plan contributions or compliance issues, ensuring that the 401(k) plan adheres to IRS regulations. For instance, if excess contributions were made to a participant's account, corrective distributions are necessary to return those funds, thereby maintaining the plan's qualified status and avoiding penalties.

In contrast, the leveling method is employed primarily for calculating contributions or benefits in a way that balances or spreads out payments over a designated period. This method can be relevant when managing how contributions impact the overall plan or individual participant accounts, particularly in the context of retirement income planning.

Therefore, the fundamental difference lies in their objectives: corrective distributions are about addressing non-compliance and ensuring adherence to regulatory requirements, whereas the leveling method pertains to the systematic calculation and management of contributions. These distinctions affirm that corrective distributions and the leveling method do not serve the same purpose in plan administration.