We are discussing the application of Treas. Reg. §1.414(v)-2(c)(3)(iii)(C) and would appreciate industry perspectives.
Assume:
401(k) plan requires ADP corrective distributions to three HCEs
One of the HCEs has room to recharacterize the refund as catch-up. The HCE is an HPI so it will have to be recharacterized as Roth
Are you interpreting the regulation to require that the actual recharacterization transaction be completed before any ADP refund distributions are issued for the plan?
Or are you treating the regulation as requiring only that the recharacterized amount be properly accounted for when determining the excess contribution/refund amount, regardless of when the recordkeeping transaction is completed?
