A Corrective Distribution is a refund of extra money from a retirement plan, like a 401k, that was contributed by mistake or in violation of IRS rules. This often happens when a plan fails annual compliance testing and needs to fix the issue by returning some of the contributions to certain employees, usually those who are highly paid. The goal is to bring the plan back into balance so that it treats all participants fairly. While getting money back might sound good, it’s usually not ideal—it can come with tax consequences and may mean the plan isn’t being managed correctly.