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Question #51 - test 12/04/97


Guest Jhagan
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Guest Jhagan

What is the amoun tof excess contribution to be refunded to HCE Part. A:

The total amount of excess contribuiton that must be refunded is $4,700.

HCE deferrals:

HCE A 9,500

HCE B 8,600

HCE C 4,700

Answer is 2,800. Need explanation.

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reduce highest dollar contributor first and bring him/her down to next highest

-reduce A by $900

reduce next two on a dollar for dollar basis until you either use up excess or get to the third person in line.

- reduce A and B by 1/2 of remaining excess since that eliminates excess before getting to C. So -

A's reduction = $900 + 1/2(4700 - 900) = $2,800.

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