Situation and any help with the answer will be greatly appreciated:

Participant had an ADP refund for 3/31/03 plan year end of $3000. She was eligible for catch-ups, so we reclassified $2000 of the ADP failure as catch-ups.

Now we are completing the 3/31/04 testing. Her amounts are as follows:

1/1/03 - 12/31/03 deferrals = $14000
4/1/03 - 3/31/04 deferrals = $14752.55

With her deferrals for the calendar year being over the $12000 limit, can we reclassify the additional $2000 (14000 deferrals - 12000 limit) as catch-ups?

Or, since she already used the 2003 catch-ups by the 3/31/03 ADP test failure, should she be getting a 402g violation of $2000?

Thanks.

If you classified $2000 of deferrals as catch up for the 3/31/03 plan year end, that applies to the 2003 catch up limit. If the participant deferred $14,000 from 1/1/03 to 12/31/03 and you classify $2000 of that as catch up, then you only look at the remaining $12,000 to determine if she exceeded a limit.

Now you are doing the testing for the plan year end 3/31/04. Anything you reclassify for this testing period will be applied toward the 2004 catch up limit.

Anyone want to cofirm this?