BG5150

Then I agree with Paul: issue a corrected W2 to the employee. Also, make sure this is not still happening in 2026.

Were the amounts applied correctly as loan repayments in his account?

no even if they will be or are HCEs.

(And the fact he will have to withdraw full the corresponding amount of funds (plus earnings) from his IRA account and an ineligible contribution.

Um, no. This was a deferral that the participant had deducted from their paycheck. It's THEIR money! So now it's a late deposit and they are owed earnings. Tell the R/K this is a plan correction and they MUST re-open the account. Are these brokerage accounts?

Is he planning on rolling over the funds?

I understand. I'm trying to make sure we are preparing the 5330's correctly. Do I file BOTH 2024 and 2025 and only pay the tax once (forgetting about late penalties for either the tax or the filing)? And I'm not sure how to fill out the 2025 5330. Right now, it has: 8/1/2024 $400/60 (original error) 12/31/2025 $400/60 (carry over) Total: $800/120 I THINK it should somehow be: 8/1/2024 $400/60 (original error) 12/31/2025 $460/69 (orig +tax + 15%) But what about the filings? Do we file 2024 and pay nothing on that, file the 2025 and pay $69? If so, how does that get explained in the appropriate section? Is it one line: $460/69 with explanation of carryover?

I'm guessing it depends on if the ER took a deduction for it. If they took $115, then put it in suspense. If not MOF.

Isn't the 2025 tax due by the date they file their taxes?

Right now, we have two 5330's. 2024: $400 involved, $60 due 2025: $400 involved, $60 due for 2024 and $400 involved and $60 due due to carryover for 2024 (So if you add them up, it's $180 due!) Also, it seems as though the 2024 form is now late and subject to penalties. Do we have leeway to ask for abatement since the error was not caught until 2025?

Employer properly deducted and remitted participant deferrals. But due to some accounting mishap on their end, they won't up contributing additional amounts for several participants. It wasn't a correction or anything. All the amounts were properly withheld and remitted the first time. So say Jimmy had a $100 deferral from his paycheck and the company deposited that timely. But when they went to do in-house balancing, it looked like he was short $15 so they sent that in for him, too. (the $15 was NOT withheld from pay) What's the correction? Put the funds in suspense account? Should it be sent back to the company (with earns, if any) as a MOF? I am leaning toward the latter.

Plan had amount involved of $400, so tax is $60 for late deposits in 2024. Amount was corrected in 2025. We prepared the 2024 5330 for $400/60 Since it was corrected in 2025, we are preparing a 2025 form as well. My admin group wants to put $800/120 on the form because it extended two years. is that right? Do they have to pay $60 tax for 2024 AND 2025? Seems to me like a 100% penalty for not paying the tax right away.

If the provisions and investments are the same, just transfer them from one plan to another. Make a note in the file and move on. The W2 will be correct. Just remember to decrease his contribs in Plan A and increase them in Plan B when you are doing your testing.

Good point.

I think the context of 'after-tax' there is the 'old school' Voluntary After Tax, the stuff that's included in the ACP test, not after tax Roth. I believe it is an administrative procedure (or it is doc-related?) to determine which goes first: pre-tax, Roth or pro-rate between the two. Or is that just for ADP refunds.