Leaderboard

Since he filed his return by the due date, he has until October 15 to correct the excess. Any earnings would be taxable the year of the contribution. He cannot change it to 2019. But, if he leaves it in the account past the correction deadline, it automatically becomes a 2019 contribution and he would owe the IRS a 6% excise tax for 2018 ( The excise tax would continue to apply for every year it remains as an excess . For instance, if he is still ineligible 2019, then it would be an excess for 2019 and the 6% excise tax would apply for 2019). An amended return would be required only if earnings needs to be added to his 2018 income. Remember that he can recahracterize it to a traditional IRA as a 2018 contribution, as long as he was under age 70 1/2 as of 12/31/2018. If it is treated as nondeductible, Form 8606 would need to be filed.

I get the idea, we've had a couple clients ask about it. Assuming a PS contribution is allowed in the plan, and further assuming the allocation method is "every participant is a separate group", it seems like something a plan sponsor can just do. If it benefits only NHCEs, then it's a deemed pass for coverage and non-discrimination. If there are HCEs also, then need to test. If there is other PS contribution, just add it in for testing of the PS.