mming

Thanks everyone for your responses. rhp, it happened during PYE 12/31/99 and fortunately the extra deferral amount is only about $400 (associated match is about $200). Doc is silent re deferrals for ineligibles.

The employer somehow allowed an NHCE to begin making deferrals to their 401(K) plan about four months before that employee met the eligibility requirements. The employer even made a quarterly match for the employee before her date of entry. Should the employee be given back the deferrals that were made before her DOP and revise her W-2 (consider it a contribution in error)? A 402(g) violation did not occur, so it can't be treated as an excess deferral. It happened to an NHCE, so it seems it shouldn't be treated as an excess contribution. What is the best way to handle this? Would giving the match back to the employer also as a contribution in error be advisable (overall match made throughout the year for her exceeded what she should have been allocated)? All help much appreciated.

Can participants who have self-directed accounts be offered individual life insurance policies withing their 401(K) plan? The type of insurance being considered by the trustee would be term, so it would be purely an expense item from each participant's account, not an "investment" as there would not be any cash value accumulating. Would there be any discrimination issues, e.g., assigned risks having to pay higher premiums for the same benefit that non-risks are getting? The agent says that males could pay less for insurance through the plan since unisex rates must be used to be nondiscriminatory(?). If that's the case, I wouldn't think any of the females would want to pay the higher premiums this would create for them. I'm also guessing that, in light of the 25% of contribution limit for premiums, a participant would lose their insurance coverage if they stopped deferring. I don't know that much about insurance, but it seems that its advantages are usually outweighed by the complications it causes in qualified plans.