Jakyasar Posted May 20, 2022 Share Posted May 20, 2022 Hi Not a 401k expert 401k plan with 3% NESH+PS An employee erroneously was allowed to defer in 2021 as never met eligibility. Got the refund timely, I am told Totally excluded for 2021, correct? Thank you Link to comment Share on other sites More sharing options...
CuseFan Posted May 20, 2022 Share Posted May 20, 2022 correct Luke Bailey 1 Kenneth M. Prell, CEBS, ERPA Vice President, BPAS Actuarial & Pension Services kprell@bpas.com Link to comment Share on other sites More sharing options...
401kology Posted May 23, 2022 Share Posted May 23, 2022 Agree, if they never met eligibility that applies to both 401k and SHNEC Luke Bailey 1 Link to comment Share on other sites More sharing options...
Jakyasar Posted May 24, 2022 Author Share Posted May 24, 2022 Thank you both. A hypothetical follow up. Say, you found this out in September after the plan year end and it was not corrected at all. The employee filed their return with the assumption that he/she deferred. He/she also received 3% NESH. What happens now? Link to comment Share on other sites More sharing options...
Bri Posted May 24, 2022 Share Posted May 24, 2022 The SH gets forfeited with its earnings. The employee's 1099-R for the refund (should be code E for an EPCRS correction) would determine what year it's taxable. Typically they're taxable in the year they get them back, even if that's a different year from the original deduction shown on their W-2. So maybe they end up taxed at their 2022 marginal rate rather than their 2021 rate. Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now