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kmhaab

Overpayment of Employer Matching Contributions

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Terminated employee continued to be paid after termination due to payroll error. Employee deferrals were withheld from the erroneous "post-termination pay" and contributed to the 401(k) and employer matching contributions were made on those deferrals. The error was caught and employee repaid the post-termination pay to the employer. But in the meantime, he took a distribution of his entire 401(k), including the deferrals and matching contributions attributable to the post-termination pay (that he since repaid).

I am clear that the employee deferrals are considered Excess Amounts under ECPRS, the overpayment is considered a corrective distribution not eligible for favorable tax treatment, and certain notice and reporting obligations apply.

But I cannot find a clear answer on the employer matching contributions? Are they considered Excess Allocations under ECPRS requiring repayment to the plan by either the participant or the employer?  But since they were contributed to the plan in error to begin with (and we're still within the same plan year), it doesn't seem rationale to me that they would be required to be repaid to the plan. The amount in question is apx. $300.  Or can they be considered Excess Amounts and treated the same as the employee deferrals? Essentially just considered taxable income to the employee? 

Thanks in advance for any thoughts.

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Two separate failures.  One is the over-distribution of the match.  The second is the over contribution of the match.  Correct each and be done.

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Thanks.  Is it correct that the overpayment of the matching contributions must be corrected by repayment to the plan?

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