My wife's employer does not normally do any matching of 401k contributions. By mistake, an employer matching amount was put in her 401k account over about a 1 year period. We didn't notice it, but the employer did after three years. During this time, the return on the principal amount that was deposited in error was close to 25% per year.

When the employer found out about the mistake, he asked for and we agreed that the principal amount should be returned. He indicated this in writing to us. I did not look into it any further until the statement came back showing that the entire amount, including the gains were withdrawn. Does anyone know what 401k regulations require in this type of situation?