Nick,
Your understanding is correct. Acceptance of IRA basis by an employer plan results in serious corrective issues for the plan. Here is a copy of Tax code Sec 408(d)(3)(A) – note the final sentence there:

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(3) Rollover contribution
An amount is described in this paragraph as a rollover
contribution if it meets the requirements of subparagraphs (A)
and (B).
(A) In general
Paragraph (1) does not apply to any amount paid or
distributed out of an individual retirement account or
individual retirement annuity to the individual for whose
benefit the account or annuity is maintained if –
(i) the entire amount received (including money and any
other property) is paid into an individual retirement account
or individual retirement annuity (other than an endowment
contract) for the benefit of such individual not later than
the 60th day after the day on which he receives the payment
or distribution; or
(ii) the entire amount received (including money and any
other property) is paid into an eligible retirement plan for
the benefit of such individual not later than the 60th day
after the date on which the payment or distribution is
received, except that the maximum amount which may be paid
into such plan may not exceed the portion of the amount
received which is includible in gross income (determined
without regard to this paragraph).
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