ADP Test Issue

[Guest t936]

We operate our 401(k) plan with a 6/30 year end. We failed the ADP Test and returned excess contributions to participants for the plan year ended 6/30. Can we allow participants who have reached the 402(g) limit of $14,000 in the first half of the year and received a distribution of excess contributions to defer in the new plan year that began on 7/1 so that they are able to contribute the maximum of $14,000 for calendar year 2005? Or are the participants limited to $14,000 less the amount of excess contributions that were returned to them?

[Guest TGeer]

Yes.

No.

See Regs 1.401(k)-1(f)(5)(i)(B) and 1.402(g)-1(e)(6). Without regard to whether the author should be shot, that's what they say.